UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒
For the quarterly period ended March 31,June 30, 2021
OR
☐
For the transition period from to
Commission file number 001-38248
RumbleOn, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 46-3951329 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
901 Irving TX | 75038 | |
| (Address of principal executive offices) | (Zip Code) |
| (214) 771-9952 | |||||
| ( | |||||
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Class B Common Stock, $0.001 par value | RMBL | The NASDAQ Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐
NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of shares of Class B Common Stock, $0.001 par value, outstanding on May
RUMBLEON, INC.
QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2021
Table of Contents to Report on Form 10-Q
| 1 | |
| 21 | |
i
PART I -FINANCIAL FINANCIAL INFORMATION
RumbleOn, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| As of June 30, 2021 | As of December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 24,972,223 | $ | 1,466,831 | ||||
| Restricted cash | 3,049,056 | 2,049,056 | ||||||
| Accounts receivable, net | 26,955,051 | 9,407,960 | ||||||
| Inventory | 19,675,990 | 21,360,441 | ||||||
| Prepaid expense and other current assets | 4,058,905 | 3,446,225 | ||||||
| Total current assets | 78,711,225 | 37,730,513 | ||||||
| Property and equipment, net | 6,295,683 | 6,521,446 | ||||||
| Right-of-use assets | 5,007,605 | 5,689,637 | ||||||
| Goodwill | 26,886,563 | 26,886,563 | ||||||
| Deferred finance charge | 10,950,000 | — | ||||||
| Other assets | 221,712 | 151,076 | ||||||
| Total assets | $ | 128,072,788 | $ | 76,979,235 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 12,821,750 | $ | 12,707,448 | ||||
| Accrued interest payable | 1,606,954 | 1,485,854 | ||||||
| Current portion of convertible debt | 415,113 | 562,502 | ||||||
| Current portion of long-term debt | 27,251,151 | 20,688,651 | ||||||
| Total current liabilities | 42,094,968 | 35,444,455 | ||||||
| Long-term liabilities: | ||||||||
| Note payable | 4,691,181 | 4,691,181 | ||||||
| Warrant liability | 13,174,216 | — | ||||||
| Convertible debt, net | 28,079,484 | 27,166,019 | ||||||
| Derivative liabilities | 48,800 | 16,694 | ||||||
| Operating lease liabilities and other long-term liabilities | 4,022,292 | 5,090,221 | ||||||
| Total long-term liabilities | 50,015,973 | 36,964,115 | ||||||
| Total liabilities | 92,110,941 | 72,408,570 | ||||||
| Commitments and contingencies (Notes 6, 7, 8, 11, 16) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020 | — | — | ||||||
| Common A stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020 | 50 | 50 | ||||||
| Common B stock, $0.001 par value, 4,950,000 shares authorized, 3,343,062 and 2,191,633 shares issued and outstanding as of June 30, 2021 and December 31, 2020 | 3,343 | 2,192 | ||||||
| Additional paid-in capital | 148,180,750 | 108,949,204 | ||||||
| Accumulated deficit | (112,222,296 | ) | (104,380,781 | ) | ||||
| Total stockholders’ equity | 35,961,847 | 4,570,665 | ||||||
| Total liabilities and stockholders’ equity | $ | 128,072,788 | $ | 76,979,235 | ||||
As of March 31, 2021 | As of December 31, 2020 | |
| ASSETS | ||
| Current assets: | ||
| Cash | $80,049 | $1,466,831 |
| Restricted cash | 2,049,056 | 2,049,056 |
| Accounts receivable, net | 21,342,681 | 9,407,960 |
| Inventory | 24,034,754 | 21,360,441 |
| Prepaid expense and other current assets | 4,050,991 | 3,446,225 |
| Total current assets | 51,557,531 | 37,730,513 |
| Property and equipment, net | 6,317,167 | 6,521,446 |
| Right-of-use assets | 5,418,220 | 5,689,637 |
| Goodwill | 26,886,563 | 26,886,563 |
| Deferred finance charge | 10,950,000 | - |
| Other assets | 159,409 | 151,076 |
| Total assets | $101,288,890 | $76,979,235 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable and accrued liabilities | $17,523,899 | $12,707,448 |
| Accrued interest payable | 827,903 | 1,485,854 |
| Current portion of convertible debt | 522,391 | 562,502 |
| Current portion of long-term debt | 32,826,176 | 20,688,651 |
| Total current liabilities | 51,700,369 | 35,444,455 |
| Long-term liabilities: | ||
| Note payable | 4,691,181 | 4,691,181 |
| Warrant liability | 10,950,000 | |
| Convertible debt, net | 27,572,970 | 27,166,019 |
| Derivative liabilities | 37,346 | 16,694 |
| Operating lease liabilities and other long-term liabilities | 4,483,929 | 5,090,221 |
| Total long-term liabilities | 47,735,426 | 36,964,115 |
| Total liabilities | 99,435,795 | 72,408,570 |
| Commitments and contingencies (Notes 6, 7, 8, 11, 16) | ||
| Stockholders' equity: | ||
| Class B Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020 | - | - |
| Common A stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020 | 50 | 50 |
| Common B stock, $0.001 par value, 4,950,000 shares authorized, 2,286,404 and 2,191,633 shares issued and outstanding as of March 31, 2021 and December 31, 2020 | 2,286 | 2,192 |
| Additional paid-in capital | 110,683,126 | 108,949,204 |
| Accumulated deficit | (108,832,367) | (104,380,781) |
| Total stockholders' equity | 1,853,095 | 4,570,665 |
| Total liabilities and stockholders' equity | $101,288,890 | $76,979,235 |
See Notes to the Condensed Consolidated Financial Statements.
RumbleOn, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue: | ||||||||||||||||
| Pre-owned vehicle sales: | ||||||||||||||||
| Powersports | $ | 27,978,693 | $ | 8,382,952 | $ | 38,833,577 | $ | 31,812,355 | ||||||||
| Automotive | 127,286,568 | 68,294,841 | 211,357,422 | 181,927,108 | ||||||||||||
| Transportation and vehicle logistics | 13,080,362 | 7,663,500 | 22,418,633 | 14,751,091 | ||||||||||||
| Total revenue | 168,345,623 | 84,341,293 | 272,609,632 | 228,490,554 | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Powersports | 21,021,492 | 7,528,810 | 28,897,883 | 28,085,447 | ||||||||||||
| Automotive | 117,117,721 | 62,493,015 | 194,977,530 | 170,572,680 | ||||||||||||
| Transportation | 10,695,165 | 5,862,734 | 18,044,506 | 10,950,792 | ||||||||||||
| Cost of revenue before impairment loss | 148,834,378 | 75,884,559 | 241,919,919 | 209,608,919 | ||||||||||||
| Impairment loss on automotive inventory | — | — | — | 11,738,413 | ||||||||||||
| Total cost of revenue | 148,834,378 | 75,884,559 | 241,919,919 | 221,347,332 | ||||||||||||
| Gross profit | 19,511,245 | 8,456,734 | 30,689,713 | 7,143,222 | ||||||||||||
| Selling, general and administrative | 18,113,151 | 11,174,287 | 31,514,495 | 29,230,714 | ||||||||||||
| Insurance recovery | — | (5,615,268 | ) | — | (5,615,268 | ) | ||||||||||
| Depreciation and amortization | 631,828 | 508,323 | 1,231,066 | 1,031,317 | ||||||||||||
| Operating income (loss) | 766,266 | 2,389,392 | (2,055,848 | ) | (17,503,541 | ) | ||||||||||
| Interest expense | (1,920,525 | ) | (1,482,408 | ) | (3,529,345 | ) | (3,699,166 | ) | ||||||||
| Change in derivative and warrant liabilities | (2,235,670 | ) | 137,488 | (2,256,322 | ) | 20,673 | ||||||||||
| Gain on early extinguishment of debt | — | — | — | 188,164 | ||||||||||||
| Loss before provision for income taxes | (3,389,929 | ) | 1,044,472 | (7,841,515 | ) | (20,993,870 | ) | |||||||||
| Benefit for income taxes | — | — | — | — | ||||||||||||
| Net income (loss) | $ | (3,389,929 | ) | $ | 1,044,472 | $ | (7,841,515 | ) | $ | (20,993,870 | ) | |||||
| Weighted average number of common shares outstanding - basic and fully diluted | 3,242,616 | 2,214,241 | 2,775,665 | 2,130,332 | ||||||||||||
| Net income (loss) per share - basic and fully diluted | $ | (1.05 | ) | $ | 0.47 | $ | (2.83 | ) | $ | (9.85 | ) | |||||
Three-Months Ended March 31, | ||
2021 | 2020 | |
| Revenue: | ||
| Pre-owned vehicle sales: | ||
| Powersports | $10,854,884 | $23,139,080 |
| Automotive | 84,070,855 | 114,198,079 |
| Transportation and vehicle logistics | 9,338,272 | 7,087,591 |
| Total revenue | 104,264,011 | 144,424,750 |
| Cost of revenue | ||
| Powersports | 7,876,391 | 20,558,286 |
| Automotive | 77,859,808 | 108,353,505 |
| Transportation | 7,349,342 | 5,088,059 |
| Cost of revenue before impairment loss | 93,085,541 | 133,999,850 |
| Impairment loss on automotive inventory | - | 11,738,413 |
| Total cost of revenue | 93,085,541 | 145,738,263 |
| Gross profit (loss) | 11,178,470 | (1,313,513) |
| Selling, general and administrative | 13,401,344 | 18,056,426 |
| Depreciation and amortization | 599,240 | 522,995 |
| Operating income (loss) | (2,822,114) | (19,892,934) |
| Interest expense | (1,608,820) | (2,216,757) |
| Change in derivative liability | (20,652) | (116,815) |
| Gain (loss) on early extinguishment of debt | - | 188,164 |
| Loss before provision for income taxes | (4,451,586) | (22,038,342) |
| Benefit for income taxes | - | - |
| Loss | $(4,451,586) | $(22,038,342) |
| Weighted average number of common shares outstanding - basic and fully diluted | 2,303,525 | 2,046,423 |
| Net income (loss) per share - basic and fully diluted | $(1.93) | $(10.77) |
See Notes to the Condensed Consolidated Financial Statements.
RumbleOn, Inc.
Condensed Consolidated Statement of Stockholders'Stockholders’ Equity
(Unaudited)
| Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, as of March 31, 2021 | 50,000 | $ | 50 | 2,286,404 | $ | 2,286 | $ | 110,683,126 | $ | (108,832,367 | ) | $ | 1,853,095 | |||||||||||||||
| Issuance of common stock for restricted stock units | — | — | 7,660 | 8 | (8 | ) | — | — | ||||||||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | 1,048,998 | 1,049 | 36,796,357 | — | 36,797,406 | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 701,275 | — | 701,275 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (3,389,929 | ) | (3,389,929 | ) | |||||||||||||||||||
| Balance as of June 30, 2021 | 50,000 | $ | 50 | 3,343,062 | $ | 3,343 | $ | 148,180,750 | $ | (112,222,296 | ) | $ | 35,961,847 | |||||||||||||||
Preferred Shares | Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders' | ||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | |
| Balance, as of December 31, 2020 | - | - | 50,000 | $50 | 2,191,633 | $2,192 | $108,949,204 | $(104,380,781) | $4,570,665 |
| Issuance of common stock for restricted stock units | - | - | - | - | 94,771 | 94 | (94) | - | - |
| Stock-based compensation | - | - | - | - | - | - | 1,734,016 | - | 1,734,016 |
| Net loss | - | - | - | - | - | - | - | (4,451,586) | (4,451,586) |
| Balance as of March 31, 2021 | - | $- | 50,000 | $50 | 2,286,404 | $2,286 | $110,683,126 | $(108,832,367) | $1,853,095 |
| Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, as of December 31, 2020 | 50,000 | $ | 50 | 2,191,633 | $ | 2,192 | $ | 108,949,204 | $ | (104,380,781 | ) | $ | 4,570,665 | |||||||||||||||
| Issuance of common stock for restricted stock units | — | — | 102,431 | 102 | (102 | ) | — | — | ||||||||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | 1,048,998 | 1,049 | 36,796,357 | — | 36,797,406 | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 2,435,291 | — | 2,435,291 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (7,841,515 | ) | (7,841,515 | ) | |||||||||||||||||||
| Balance as of June 30, 2021 | 50,000 | $ | 50 | 3,343,062 | $ | 3,343 | $ | 148,180,750 | $ | (112,222,296 | ) | $ | 35,961,847 | |||||||||||||||
Preferred Shares | Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders' | ||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | |
| Balance, as of December 31, 2019 | - | - | 50,000 | $50 | 1,111,681 | $1,112 | $92,268,213 | $(79,381,806) | $12,887,569 |
| Issuance of common stock, net of issuance cost | - | - | - | - | 1,035,000 | 1,035 | 10,779,045 | - | 10,780,080 |
| Issuance of common stock for restricted stock units | - | - | - | - | 4,485 | 4 | (4) | - | - |
| Convertible note exchange | - | - | - | - | - | - | 2,923,755 | - | 2,923,755 |
| Stock-based compensation | - | - | - | - | - | - | 846,370 | - | 846,370 |
| Net loss | - | - | - | - | - | - | - | (22,038,342) | (22,038,342) |
| Balance as of March 31, 2020 | - | - | 50,000 | 50 | 2,151,166 | 2,151 | 106,817,379 | (101,420,148) | 5,399,432 |
| Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, as of March 31, 2020 | 50,000 | $ | 50 | 2,151,166 | $ | 2,151 | $ | 106,817,379 | $ | (101,420,148 | ) | $ | 5,399,432 | |||||||||||||||
| Issuance of common stock for restricted stock units | — | — | 21,610 | 22 | (22 | ) | — | — | ||||||||||||||||||||
| Convertible note exchange | — | — | — | — | — | — | — | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 716,391 | — | 716,391 | |||||||||||||||||||||
| Adjustment for fractional shares in reverse stock split | — | — | 7,131 | 7 | (7 | ) | — | — | ||||||||||||||||||||
| Net income | — | — | — | — | — | 1,044,472 | 1,044,472 | |||||||||||||||||||||
| Balance as of June 30, 2020 | 50,000 | 50 | 2,179,907 | 2,180 | 107,533,741 | (100,375,676 | ) | 7,160,295 | ||||||||||||||||||||
| Class A Common Shares | Class B Common Shares | Additional Paid in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, as of December 31, 2019 | 50,000 | $ | 50 | 1,111,681 | $ | 1,112 | $ | 92,268,213 | $ | (79,381,806 | ) | $ | 12,887,569 | |||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | 1,035,000 | 1,035 | 10,779,045 | — | 10,780,080 | |||||||||||||||||||||
| Issuance of common stock for restricted stock units | — | — | 26,095 | 26 | (26 | ) | — | — | ||||||||||||||||||||
| Convertible note exchange | — | — | — | — | 2,923,755 | — | 2,923,755 | |||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 1,562,761 | — | 1,562,761 | |||||||||||||||||||||
| Adjustment for fractional shares in reverse stock split | — | — | 7,131 | 7 | (7 | ) | — | — | ||||||||||||||||||||
| Net loss | — | — | — | — | — | (20,993,870 | ) | (20,993,870 | ) | |||||||||||||||||||
| Balance as of June 30, 2020 | 50,000 | 50 | 2,179,907 | 2,180 | 107,533,741 | (100,375,676 | ) | 7,160,295 | ||||||||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
RumbleOn, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six-Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (7,841,515 | ) | $ | (20,993,870 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,231,066 | 1,031,317 | ||||||
| Amortization of debt discounts | 1,150,076 | 1,051,898 | ||||||
| Share based compensation | 2,435,291 | 1,562,761 | ||||||
| Impairment loss on inventory | — | 11,738,413 | ||||||
| Impairment loss on property and equipment | — | 177,626 | ||||||
| Loss (gain) from change in value of derivatives | 2,256,322 | (27,500 | ) | |||||
| Gain on early extinguishment of debt | — | (188,164 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses and other current assets | (612,680 | ) | 79,154 | |||||
| Increase in inventory | 1,684,451 | 14,154,657 | ||||||
| (Increase) in accounts receivable | (17,547,091 | ) | (6,313,321 | ) | ||||
| (Increase) decrease in other assets | (80,550 | ) | 167,186 | |||||
| Decrease in accounts payable and accrued liabilities | (44,429 | ) | (2,732,098 | ) | ||||
| Decrease in other liabilities | (217,250 | ) | — | |||||
| Increase in accrued interest payable | 121,100 | 869,800 | ||||||
| Net cash (used in) provided by operating activities | (17,465,209 | ) | 577,859 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (100,000 | ) | (174,786 | ) | ||||
| Technology development | (905,305 | ) | (614,113 | ) | ||||
| Net cash used in investing activities | (1,005,305 | ) | (788,899 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | 2,500,000 | 8,272,375 | ||||||
| Payments on notes payable | - | (1,521,825 | ) | |||||
| Net proceeds (payments) from lines of credit | 3,678,500 | (20,627,794 | ) | |||||
| Proceeds from PPP loans | - | 5,176,845 | ||||||
| Net Proceeds from sale of common stock | 36,797,406 | 10,780,080 | ||||||
| Net cash provided by financing activities | 42,975,906 | 2,079,681 | ||||||
| NET CHANGE IN CASH | 24,505,392 | 1,868,641 | ||||||
| CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD | 3,515,887 | 6,726,282 | ||||||
| CASH AND RESTRICTED CASH AT END OF PERIOD | $ | 28,021,279 | $ | 8,594,923 | ||||
Three Months Ended March 31, | ||
2021 | 2020 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net loss | $(4,451,586) | $(22,038,342) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 599,240 | 522,995 |
| Amortization of debt discounts | 558,840 | 627,755 |
| Share based compensation | 1,734,016 | 846,370 |
| Impairment loss on inventory | - | 11,738,413 |
| Impairment loss on property and equipment | - | 177,626 |
| Loss from change in value of derivatives | 20,652 | 116,815 |
| Gain on early extinguishment of debt | - | (188,164) |
| Changes in operating assets and liabilities: | ||
| Increase in prepaid expenses and other current assets | (604,766) | (159,175) |
| Increase in inventory | (2,674,313) | (9,765,663) |
| (Increase) decrease in accounts receivable | (11,934,721) | 240,682 |
| (Increase) decrease in other assets | (8,333) | 155,175 |
| Increase (decrease) in accounts payable and accrued liabilities | 4,695,873 | (2,176,064) |
| Increase in other liabilities | (214,296) | - |
| (Decrease) increase in accrued interest payable | (657,951) | 434,318 |
| Net cash used in operating activities | (12,937,345) | (19,467,259) |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchase of property and equipment | - | (132,366) |
| Technology development | (394,962) | (290,376) |
| Net cash used in investing activities | (394,962) | (422,742) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Proceeds from notes payable | 2,500,000 | 8,272,375 |
| Payments on notes payable | (1,397,098) | |
| Net proceeds from line of credit | 10,842,623 | 2,097,755 |
| Net Proceeds from sale of common stock | - | 10,780,080 |
| Net cash provided by financing activities | 11,945,525 | 21,150,210 |
| NET CHANGE IN CASH | (1,386,782) | 1,260,209 |
| CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD | 3,515,887 | 6,726,282 |
| CASH AND RESTRICTED CASH AT END OF PERIOD | $2,129,105 | $7,986,491 |
See Notes to the Condensed Consolidated Financial Statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 –DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Overview
RumbleOn, Inc. (the "Company") was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. ("Smart Server"). On February 13, 2017,Nevada. Unless the Company changed its name from Smart Server, Inc.context requires otherwise, references in this report to “RumbleOn,” the “Company,” “we,” “us,” and “our” refer to RumbleOn Inc.and its consolidated subsidiaries.
We are a technology driven, motor vehicle dealercompany and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.
We operate an infrastructure-light platform that facilitates the ability of all participants in the supply chain, including RumbleOn, other dealers and consumers to Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal is to transform the way VIN-specific pre-owned vehicles are bought and sold by providing users with the most comprehensive, efficient, timely and transparent transaction experiences. While our initial customer facing emphasis through most of 2018 was on motorcycles and other powersports vehicles, we continue to enhance our platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Of the 3,500 vehicles we sold during the three-months ended March 31, 2021, 2,494 (71%) were automotive and 1,006 (29%) were powersports vehicles. For the three-months ended March 31, 2020, we sold 7,420 vehicles of which 4,603 (62%) were automotive and 2,817 (38%) were powersports vehicles. In August 2020, we launched RumbleOn 3.0,the next generation of RumbleOn.com, bringing traditional brick and mortar powersports dealers across the country online. Then, in March 2021, we announced a definitive agreement to combine our ecommercee-commerce platform with the RideNow powersports group, the nation'snation’s largest powersports retailer, as discussed further below. The combination of RumbleOn and RideNow will become the first omnichannel platform in powersports. This channel is a full-service platform that will revolutionize the customer experience. This omnichannel platform will offer the consumer the fastest, easiest, and most transparent transaction online or in store experience while providing customers the most comprehensive offering that includes: Buy, Sell or Trade without Leaving Your Home;Virtual Inventory Listings Online and In Store;Physical Retail and Service Locations;Proprietary Supply Aggregation;Apparel, Parts, Service and Accessories;Vehicle Transportation and Logistics;Online Cash Offers; and Proprietary Secondary Online Financing.
Basis of Presentation
The
accompanyingunaudited Condensed Consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information and with the instructions on Form 10-Q and Rule 10-01 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Condensed Consolidated financial statements include the accounts of RumbleOn Inc. and its subsidiaries, which are allLiquidity
We have incurred losses and negative cash flow from operations since inception through March 31, 2021 and expect to incur additional losses and negative cash flow in the future.June 30, 2021. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital, including through debt and equity financing. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Noteinstruments. See “Note 7 — Notes Payable and Lines of Credit, Note” “Note 8 - Convertible Notes,” and Note“Note 9 — Stockholders Equity.” Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. Due to the impact of COVID-19Covid-19 on the economy, we have a strong focusfocused on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under lines of credit, monetization of our retail loan portfolio, rationalizing costs and expenses, and proceeds from our April 8, 2021 equity offering of 1,048,998 shares of Class B common stock that generated net proceeds of $36,700,000;$36,797,406; refer to Note 209 — Subsequent Events.
Use of Estimates
The preparation of these unaudited Condensed Consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are based on historical experience, management'smanagement’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates. In particular, the novel COVID-19Covid-19 pandemic and the resultingcontinuing adverse impacts to global economic conditions, as well as the Company'sCompany’s operations, may impact future estimates including, but not limited to inventory valuations, fair value measurements, asset impairment charges and discount rate assumptions.
Recent Pronouncements
Adoption of New Accounting Standards
In June 2016, the FASB issued ASU 2016-13,
Financial instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsIn December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (NOTE 2 –ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Trade | $ | 18,940,112 | $ | 8,859,237 | ||||
| Finance receivables held for sale | 8,641,945 | 2,117,809 | ||||||
| 27,582,057 | 10,977,046 | |||||||
| Less: allowance for doubtful accounts | 627,006 | 1,569,086 | ||||||
| $ | 26,955,051 | $ | 9,407,960 | |||||
March 31, 2021 | December 31, 2020 | |
| Trade | $16,518,164 | $8,859,237 |
| Finance | 5,237,860 | 2,117,809 |
21,756,024 | 10,977,046 | |
| Less: allowance for doubtful accounts | 413,343 | 1,569,086 |
$21,342,681 | $9,407,960 |
NOTE 3 – INVENTORY
Inventory consists of the following as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Pre-owned vehicles: | ||||||||
| Powersport vehicles | $ | 3,981,570 | $ | 1,869,830 | ||||
| Automobiles and trucks | 15,920,275 | 19,592,896 | ||||||
| 19,901,845 | 21,462,726 | |||||||
| Less: Reserve | 225,855 | 102,285 | ||||||
| $ | 19,675,990 | $ | 21,360,441 | |||||
March 31, 2021 | December 31, 2020 | |
| Pre-owned vehicles: | ||
| Powersport vehicles | $1,176,343 | $1,869,830 |
| Automobiles and trucks | 23,147,940 | 19,592,896 |
24,324,283 | 21,462,726 | |
| Less: Reserve | 289,529 | 102,285 |
$24,034,754 | $21,360,441 |
NOTE 4 – PROPERTY AND EQUIPMENT, NET
The following table summarizes property and equipment, net of accumulated depreciation and amortization as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Vehicles | $ | 340,603 | $ | 240,603 | ||||
| Furniture and equipment | 191,047 | 191,047 | ||||||
| Technology development and software | 11,913,606 | 11,008,303 | ||||||
| Leasehold improvements | 321,082 | 321,082 | ||||||
| Total property and equipment | 12,766,338 | 11,761,035 | ||||||
| Less: accumulated depreciation and amortization | (6,470,655 | ) | (5,239,589 | ) | ||||
| Total | $ | 6,295,683 | $ | 6,521,446 | ||||
March 31, 2021 | December 31, 2020 | |
| Vehicles | $240,603 | $240,603 |
| Furniture and equipment | 191,047 | 191,047 |
| Technology development and software | 11,403,264 | 11,008,303 |
| Leasehold improvements | 321,082 | 321,082 |
| Total property and equipment | 12,155,996 | 11,761,035 |
| Less: accumulated depreciation and amortization | 5,838,829 | 5,239,589 |
| Total | $6,317,167 | $6,521,446 |
Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from 3 to 5 years.
On March 31,June 30, 2021, capitalized technology development costs were $11,195,253.$11,705,595 and capitalized software costs were 208,011. Total technology development costs incurred for the three-monthsthree and six months ended March 31,June 30, 2021 was $758,990$939,354 and $1,698,344, respectively, of which $394,962$510,341 and $905,303, respectively was capitalized and $364,028$429,013 and $793,041, respectively, was charged to expense in the accompanying Condensed Consolidated Statements of Operations. Depreciation expense for the three-monthsthree and six-month periods ended March 31,June 30, 2021, was $599,240,$631,828 and 1,231,066, respectively, which included the amortization of capitalized technology development costs of $546,683.$570,875 and 1,117,557, respectively. Total technology development costs incurred for the three-monthsthree and six-months ended March 31,June 30, 2020 was $911,210$554,551 and $1,465,761, respectively, of which $290,376$323,737 and $614,113, respectively was capitalized and $620,834$230,814 and $851,648, respectively, was charged to expense in the accompanying Condensed Consolidated Statements of Operations. Depreciation expense for the three-monthsthree and six-month periods ended March 31,June 30, 2020 was $522,995,$508,322 and $1,031,317, respectively, which included the amortization of capitalized technology development costs of $437,943.
NOTE 5 –INTANGIBLE ASSETS AND GOODWILL
The following is a summary of the changes in the carrying amount of goodwill and other indefinite-lived assetassets as of December 31, 2020 and the three-monthssix-month periods ended March 31,June 30, 2021. Due to the significant decline in the Company’s stock price and the economic effect of COVID-19,Covid-19, the Company determined a triggering event for Goodwill impairment existed at March 31, 2020. As a result, the Company performed a quantitative impairment analysis for the Automotive segment. The Company’s impairment test indicated no impairment existed as the estimated fair value of the reporting unit exceeded its carrying value at March 31, 2020. Management determined no triggering event occurred during the quarter ended March 31,June 30, 2020 or for the six-months ended June 30, 2021.
| Goodwill | Indefinite Lived Intangible Assets | |||||||
| Balance at March 31, 2021 | $ | 26,886,563 | $ | 45,515 | ||||
| Acquisitions | — | — | ||||||
| Impairment | — | — | ||||||
| Balance at June 30, 2021 | $ | 26,886,563 | $ | 45,515 | ||||
Goodwill | Indefinite Lived Intangible Assets | Goodwill | Indefinite Lived Intangible Assets | |||||||
| Balance at December 31, 2020 | $26,886,563 | $45,515 | $ | 26,886,563 | $ | 45,515 | ||||
| Acquisitions | - | — | — | |||||||
| Impairment | - | — | — | |||||||
| Balance at March 31, 2021 | $26,886,563 | $45,515 | ||||||||
| Balance at June 30, 2021 | $ | 26,886,563 | $ | 45,515 | ||||||
The $45,515 of indefinite lived intangible asset is included in other assets in the Company'sCompany’s Condensed Consolidated balance sheets.
NOTE 6 – ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
The following table summarizes accounts payable and other accrued liabilities as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Accounts payable | $ | 8,845,385 | $ | 8,167,957 | ||||
| Operating lease liability-current portion | 1,750,127 | 1,630,002 | ||||||
| Accrued payroll | 1,259,875 | 1,079,771 | ||||||
| State and local taxes | 104,888 | 856,341 | ||||||
| Other accrued expenses | 861,475 | 973,377 | ||||||
| Total | $ | 12,821,750 | $ | 12,707,448 | ||||
March 31, 2021 | December 31, 2020 | |
| Accounts payable | $11,128,671 | $8,167,957 |
| Operating lease liability-current portion | 1,696,078 | 1,630,002 |
| Accrued payroll | 1,663,436 | 1,079,771 |
| State and local taxes | 709,988 | 856,341 |
| Other accrued expenses | 2,325,726 | 973,377 |
| Total | $17,523,899 | $12,707,448 |
NOTE 7 – NOTES PAYABLE AND LINES OF CREDIT
Notes payable and lines of credit consisted of the following as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through February 10, 2020 and 10.0% thereafter through maturity, which is January 31, 2021. | $ | — | $ | 833,334 | ||||
| Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 8.5% through March 31, 2020 and 10.0% thereafter through maturity which is June 30, 2021. | 297,411 | 669,175 | ||||||
| Notes payable-Bridge loan dated March 12, 2021. Facility provides up to $2,500,000 of available credit secured by certain intellectual assets. Interest rate at 12.0% annually payable at maturity which is the earlier of September 21, 2021, or upon the issuance of debt or equity above a certain threshold. | 2,500,000 | — | ||||||
| Line of credit-NextGear floor plan dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate on June 30, 2021, was 10.25%. Principal and interest is payable on demand. | 21,857,234 | 17,811,626 | ||||||
| Line of Credit-RumbleOn Finance. Line of credit secured by the loans and other assets of RumbleOn Finance, LLC. Interest rate on June 30, 2021, was 7.25%. Principal and interest is payable on demand. | 2,110,842 | 888,852 | ||||||
| Notes payable-PPP Loans dated May 1, 2020. Payments of principal and interest were deferred until September 1, 2021, at which time the Company will make equal payments of principal and interest through maturity, which is April 1, 2025. | 5,176,845 | 5,176,845 | ||||||
| Total notes payable and lines of credit | $ | 31,942,332 | $ | 25,379,832 | ||||
| Less: Current portion | 27,251,151 | 20,688,651 | ||||||
| Long-term portion | $ | 4,691,181 | $ | 4,691,181 | ||||
March 31, 2021 | December 31, 2020 | |
| Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through February 10, 2020 and 10.0% thereafter through maturity, which is January 31, 2021. | $- | $833,334 |
| Notes payable-private placement dated March 31, 2017. Interest is payable semi-annually at 8.5% through March 31, 2020 and 10.0% thereafter through maturity which is June 30, 2021 | 297,411 | 669,175 |
| Notes payable-Bridge loan dated March 12, 2021. Facility provides up to $2,500,000 of available credit secured by certain intellectual assets. Interest rate at 12.0% annually payable at maturity which is the earlier of September 21, 2021 or upon the issuance of debt or equity above a certain threshold. | 2,500,000 | - |
Line of credit-NextGear floor plan dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate on March 31, 2021 was 8.25%. Principal and interest is payable on demand. | 27,043,101 | 17,811,626 |
| Line of Credit- RumbleOn Finance. Line of credit secured by the loans and other assets of RumbleOn Finance, LLC. Interest rate on March 31, 2021 was 7.25%. Principal and interest is payable on demand. | 2,500,000 | 888,852 |
| Notes payable-PPP Loans dated May 1, 2020. Payments of principal and interest were deferred until September 1, 2021, at which time the Company will make equal payments of principal and interest through maturity, which is April 1, 2025. | 5,176,845 | 5,176,845 |
| Total notes payable and lines of credit | $37,517,357 | $25,379,832 |
| Less: Current portion | 32,826,176 | 20,688,651 |
| Long-term portion | $4,691,181 | $4,691,181 |
Line of Credit-Floor Plan-NextGear
On October 30, 2018, Wholesale, as borrower,we entered into a floorplanfloor plan vehicle financing credit line (the "NextGearlines (collectively the “NextGear Credit Line"Line”) with NextGear. As of March 31,June 30, 2021, the credit line was amended pursuant to which the LenderNextGear Credit Line provides that NextGear may provideadvance up to $25,000,000 in financing.financing to both Wholesale and AutoSport. Advances, under the NextGear Credit Line, if not demanded earlier, are due and payable for each vehicle financed under the NextGear Credit Line as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Advances, effective in April 2021 under the NextGear Credit Line required that theThe Company maintain $3,000,000 on deposit as restricted cash. Advances under the NextGear Credit Line will bear interest at an initiala per annum rate of 6.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based plus 4% on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full.June 30, 2021. Interest expense on the NextGear Credit Line for the three-monthsthree and six-month periods ended March 31,June 30, 2021 was $524,880 and $828,801, respectively. Interest expense on the NextGear Credit Line for the three and six-month ended June 30, 2020, was $303,918$513,301 and $458,528, $1,211,159, respectively.
Line of Credit-Floor Plan-Ally
On February 16, 2018, the Company, through its wholly-owned subsidiary RMBL MO, entered into an Inventory Financing and Security Agreement (the "Credit Facility"“Ally Facility”) with Ally Bank ("Ally") and. The Ally Financial, Inc., a Delaware corporation ("Ally" togetherFacility terminated in accordance with Ally Bank, the "Lender"), pursuant to which the Lender may provide up to $25,000,000its terms in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require that the Company maintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at a per annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed. Interest under the Credit Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, RMBL MO's obligation to pay upon demand any outstanding liabilities of the Credit Facility), the Lender may, at its option and without notice to the RMBL MO, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the Lender and secured by the Company pursuant to a General Security Agreement.
Line of Credit- RumbleOn Finance Facility
On June 23, 2020, RumbleOn Finance, LLC, a wholly owned subsidiary of the Company ("(“RumbleOn Finance"Finance”), entered into a loan agreement providing for up to $2,500,000 in proceeds (the "RumbleOn Finance Facility"“ROF Facility”) with CL Rider Finance, L.P. (the "CL Rider"“CL Rider”) as evidenced by the loan commitment dated as of June 17, 2020.. In connection with the loan agreement,ROF facility, RumbleOn Finance pledged its assets to CL Rider to secure the RumbleOn FinanceROF Facility and executed a promissory note in favor of the CL Rider pursuant to which the RumbleOn FinanceROF Facility will accrue interest at an initialinterest rate of 4.0%not lower than 7% per annum. The RumbleOn FinanceROF Facility is payable on demand by CL Rider. Interest expense on the ROF Facility for the three monthsand six-month periods ended March 31,June 30, 2021 was $29,428.$41,258 and $70,686, respectively. Interest expenses on the ROF Facility for the three and six-months ended June 30, 2020, was $0 and $0, respectively.
Notes Payable
NextGen
On February 8, 2017, in connection with the acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen (which note was subsequently assigned to Halcyon in February 2018) in the amount of $1,333,334. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date; (ii) at a rate of 8.5% annually from the second anniversary of the closing date through February 10, 2020; and (iii) 10.0% thereafter through the Maturity Date. Upon the occurrence of any event of default, the outstanding balance under the NextGen Note shall become immediately due and payable upon election of the holder. The Company'sCompany’s obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro, pursuant to an Unconditional Guaranty Agreement (the "Guaranty Agreement"“Guaranty Agreement”), by and among NextGen and NextGen Pro, and a related Security Agreement between the parties, each dated as of February 8, 2017. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all the Company's obligations under the NextGen Note. As discussed below, the note was exchanged for a new note in January 2020 which extended the maturity date of the note until January 31, 2021
Private Placement
On March 31, 2017, the Company completed funding of the second tranche of the 2016 Private Placement (as defined below). The investors were issued 58,096 shares of Class B Common Stock of the Company and promissory notes (the "Private“Private Placement Notes"Notes”) in the amount of $667,000, in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amounts until paid in full. The Private Placement Notes mature on January 31, 2021. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date; at a rate of 8.5% annually from the second anniversary of the closing date through March 31,June 30, 2020; and at a rate of 10% thereafter through the Maturity Date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. Based on the relative fair values attributed to the Class B Common Stock and promissory notes issued in the 2016 Private Placement, the Company recorded a debt discount on the promissory notes of $667,000 with the corresponding amounts recorded as an addition to paid-in capital. The debt discount was fully amortized to interest expense at the scheduled maturity of the Private Placement Notes in January 2021 using the effective interest method. The effective interest rate at March 31,June 30, 2021 was 26.0%. Interest expense on the Private Placement Notes was $10,491$7,415 and $91,893,$17,906, respectively for the three-monthsthree and six months ended March 31, 2021June 30, 2021. Interest expense for the three and six-months ended June 30, 2020 was $16,684 and $108,576, respectively, which included debt discount amortization of $0 and $75,601, for the three-months ended March 31, 2020. There was no amortization of debt discount for the period ended March 31, 2021.respectively. On January 31, 2021, a payment of $371,000 was made on the Private Placement Note and the remaining balance of $297,411 was extended through June 30, 2021.
Exchange of Notes Payable
Certain of the Company'sCompany’s investors extended the maturity of currently outstanding promissory notes, and exchanged such notes for new notes (the "New“New Investor Notes"Notes”), pursuant to that certain Note Exchange Agreement, dated January 14, 2020 (the "Investor“Investor Note Exchange Agreement"Agreement”), by and between the Company and each investor thereto (the "Investors"“Investors”), including Halcyon, an entity affiliated with Kartik Kakarala, a former director of the Company, such New Investor Note for an aggregate principal amount of $833,333 (after taking account of a $500,000 pay down of the previously outstanding Halcyon note), Blue Flame Capital, LLC ("(“Blue Flame"Flame”), an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114, and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The Halcyon and Blue Flame outstanding principal plus accrued interest were paid in full on January 31, 2021. The remaining outstanding principal plus accrued interests of the New Investor Notes was paid in full on July 1, 2021.
PPP Loans
On May 1, 2020, the Company, and its wholly owned subsidiaries Wholesale and Wholesale Express (together, the "Subsidiaries,"“Subsidiaries,” and with the Company, the "Borrowers"“Borrowers”), each entered into loan agreements and related promissory notes (the "SBA“SBA Loan Documents"Documents”) to receive U.S. Small Business Administration Loans (the "SBA Loans"“SBA Loans”) pursuant to the Paycheck Protection Program (the "PPP"“PPP”) established under the CARES Act, in the aggregate amount of $5,176,845 (the "Loan Proceeds"“Loan Proceeds”). The Borrowers received the Loan Proceeds on May 1, 2020, and under the SBA Loan Documents, the SBA Loans had an initial maturity date of April 30, 2022 and an annual interest rate of 1.0%. Payment of principal and interest, to be paid monthly, on the PPP Loans can be prepaid by the Company at any time and was originally deferred through October 30, 2020. On October 7, 2020, the Small Business Administration published guidance of its interpretation of the CARES ACT and of the Paycheck Protection Program Interim Final Rules that indicates, pursuant to the PPP Flexibility Act of 2020, the deferral period for borrower payments of principal, interest and fees on all PPP was extended 10 months after the borrower’s loan forgiveness period. Additionally, the SBA lender agreed to extend the maturity pursuant to the Interim Final Rules. As a result, monthly equal payments of principal and interest will begin September 1, 2021, with the last payment due April 1, 2025.
Pursuant to the terms of the SBA Loan Documents, the Borrowers can apply for and receive forgiveness for all, or a portion of the loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, "Qualifying Expenses"“Qualifying Expenses”), and on the maintenance ofemployeeof employee and compensation levels during a certain time period following the funding of the PPP Loans. The Company used a portion ofInterest expense on the proceedsPPP Notes for the three and six months ended June 30, 2021, was $13,307 and $26,650, respectively. Interest expense on the PPP Notes for the three and six months ended June 30, 2020, was $7,708 and $7,708, respectively.
In July 2021, we applied to obtain forgiveness of the PPP Loans, for Qualifying Expenses. However,however, the Company can provide no assurance is provided that the Companyit will be able to obtain forgiveness of the PPP Loans in whole or in part Interest expense on the PPP Notes for the three-months ended March 31, 2021 was $
Bridge Loan
In connection with the proposed acquisition of RideNow Transaction (as defined below) (See Note“Note 19 – Proposed Acquisition)Acquisition”) on March 12, 2021, the Company and its subsidiary, NextGen Pro, LLC (“NextGen Pro”), executed a secured promissory note with BRF Finance Co., LLC (“BRF Finance”), an affiliate of B. Riley Securities, Inc., pursuant to which BRF Finance has loaned the Company $2,500,000 (the “Bridge Loan”). The Bridge Loan matures on the earlier of September 30, 2021 or upon the issuance of debt or equity above a threshold. The Bridge Loan is secured by certain intellectual property assets held by NextGen Pro. Interest will accrue on the Bridge Loan until maturity (by acceleration or otherwise) at a rate of 12.0% annually. Interest expense on the Bridge Loan was $16,667 for the three monthsand six-months ended March 31, 2021.June 30, 2021 was $77,113 and $93,780, respectively.
NOTE 8 – CONVERTIBLE NOTES
As of March 31,June 30, 2021, the outstanding convertible promissory notes net of debt discount and issue costs are summarized as follows:
| Principal Amount | Debt Discount | Carrying Amount | ||||||||||
| Convertible senior notes | $ | 38,750,000 | $ | 10,670,516 | $ | 28,079,484 | ||||||
| Convertible notes-Autosport: | ||||||||||||
| $1,536,000 unsecured note | 640,000 | 224,887 | 415,113 | |||||||||
| 39,390,000 | 10,895,403 | 28,494,597 | ||||||||||
| Less: Current portion | 640,000 | 224,887 | 415,113 | |||||||||
| Long-term portion | $ | 38,750,000 | $ | 10,670,516 | $ | 28,079,484 | ||||||
Principal Amount | Debt Discount | Carrying Amount | |
| Convertible senior notes | $38,750,000 | $11,215,473 | $27,534,527 |
| Convertible notes-Autosport: | |||
| $1,536,000 unsecured note | 832,000 | 271,166 | 560,834 |
39,582,000 | 11,486,639 | 28,095,361 | |
| Less: Current portion | 768,000 | 245,609 | 522,391 |
| Long-term portion | $38,814,000 | $11,241,030 | $27,572,970 |
Convertible Senior Notes
On May 9, 2019, the Company entered into a purchase agreement (the "Purchase Agreement"“Purchase Agreement”) with JMP Securities LLC ("(“JMP Securities"Securities”) to issue and sell $30,000,000 in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the "Old Notes"“Old Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”) (the "2019“2019 Note Offering"Offering”). The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the 2019 Note Offering. The proceeds for the 2019 Note Offering after deducting the initial purchaser's discounts, advisory fees, and related offering expenses, were approximately $27,385,500.
The New Notes were issued on January 14, 2020 pursuant to an Indenture (the "New Indenture"“New Indenture”), by and between the Company and the Trustee. The New Note Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The New Notes bear interest at 6.75% per annum, payable semiannually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Notes may bear additional interest under specified circumstances relating to the Company'sCompany’s failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradeabletradable as required by the New Indenture. The New Notes mature on January 1, 2025, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a "make-whole“make-whole fundamental change"change” (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 62.0 shares per $1,000 in principal amount.
The New Indenture contains a "blocker provision"“blocker provision” which provides that no holder (other than the depositarydepository with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B Common Stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B Common Stock.
The New Notes are not redeemable by the Company before the January 14, 2023. The Company may redeem for cash all or any portion of the New Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the New Notes.
The New Notes rank senior in right of payment to any of the Company'sCompany’s indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company'sCompany’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company'sCompany’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).
The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payablepayable.
As of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than May 29, 2020 (which date was adjusted for certain intervening events, including the COVID-19 pandemic). The registration statement was filed on June 19, 2020 and declared effective on June 30, 2020. In connection with the filing of the registration statement, the Company deregistered the Old Notes previously registered for resale.
The Company accounted for the exchange of the Old Notes and the issuance of the New Notes in accordance with the conversion guidance in ASC 470-20 "Debt“Debt – Debt with Conversion and Other Option"Option” (ASC 470-20) and determined that the exchange of the Old Notes for the New Notes required derecognition of the Old Notes given that the difference in the fair value of the embedded the conversion feature of the New Notes relative to the Old Notes was in excess of 10 percent of the Old Notes conversion feature fair value. In derecognizing the Old Notes, the Company recognized a gain of $188,164 equal to difference between the fair value of the Old Notes liability immediately prior to extinguishment and the carry amount of the liability component of the Old Notes, including any all-unamortizedunamortized debt issuance costs. The remaining consideration of $2,593,163 was allocated to the reacquisition of the equity component and recognized as a reduction of stockholder'sstockholder’s equity.
The New Notes were accounted for in accordance with FASB ASC 470, Debt and ASC 815, Derivatives and Hedging, which required bifurcation of the liability and equity components. The Company determined the carrying amount of the liability component was $25,280,430 and represents the present value of the New Notes cash flows using an implied discount rate of 18.7%, which is a yield applicable to similar debt instruments that do not have the conversion feature. After allocation of the initial proceeds to the liability components, the remaining amount was allocated to the equity component and recorded as additional paid in capital. The Company recorded $13,529,141 in total debt discount related to the New Notes which included $59,571 of debt issuance costs. The Company allocates transaction costs related to the issuance of the New Notes to the liability and equity components using the same proportions as the initial carrying value of the New Notes. The $59,571 of transaction costs attributable to the debt component are being amortized to interest expense using the effective interest method over the term of the New Notes. Transaction costs attributable to the equity component were $40,669 and are netted with the equity component of the New Notes in stockholders'stockholders’ equity. The equity component is not remeasured as long as it continues to meet the conditions for equity classification The Company further valued a derivative liability in connection with the interest make-whole provision at $20,673$11,454 on the issuance date based on a lattice model. This amount was recorded as a debt discount and is amortized to interest expense over the term of the New Notes using the effective interest rate. The value of the derivative liability increased to $137,488 as of March 31,June 30, 2020. The derivative liability is remeasured at each reporting date with an increase in value of $20,652 $11,454 and $32,106 being recorded in other incomechange in derivative liability in the Condensed Consolidated Statement of Operations for the three-monthsthree and six months ended March 31, 2021.June 30, 2021, respectively. The value of the derivative liability as of March 31,June 30, 2021 was $37,346.$48,800.
The
interest expense recognized with respect to the Convertible Notes for the three and six-month periods ended June 30, 2021 and 2020 was as follows:| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Contractual interest expense | $ | 653,906 | $ | 653,906 | $ | 1,307,812 | $ | 1,258,359 | ||||||||
| Amortization of debt discount | $ | 544,958 | $ | 225,013 | $ | 1,067,005 | $ | 888,136 | ||||||||
| Total interest expense | $ | 1,198,864 | $ | 878,919 | $ | 2,374,817 | $ | 2,146,495 | ||||||||
Convertible Notes-Autosport USA
On February 3, 2019, in connection with the Autosport Acquisition, the Company issued a: (i) $500,000 Promissory Note and (ii) $1,536,000 Convertible Note in favor of the Seller. In connection with the Autosport Acquisition, the Buyer also assumed additional debt of $257,933 pursuant to a Second Convertible Note. The Second Convertible Note had a term of one year and accrued interest at a simple rate of 5.0% per annum. The note was repaid in full during the three months ended March 31, 2020. Interest expense on the Convertible Note for the three and six-month periods ended June 30, 2020 was $0 and included $7,477, respectively and included debt amortization of $0 and $6,382, respectively.
The $500,000 Promissory Note had a term of fifteen months and accrued interest at a simple rate of 5.0% per annum. Interest under the Promissory Note was payable upon maturity. In June 2020, principal payments of $122,000 were made and the promissory note maturity date was extended to October 1, 2020. Any interest and principal due under the Promissory Note was convertible, at the Buyer'sBuyer’s option into shares of the Company'sCompany’s Class B Common Stock at a conversion price equal to the weighted average trading price of the Company'sCompany’s Class B Common Stock on The Nasdaq Stock Market for the twenty (20) consecutive trading days preceding the conversion date. The Buyer elected not to convert any principal or interest and the loan has been repaid in full.full in 2020. Interest expense for the Promissory Note for the three and six-month periods ended June 30, 2020 was $7,227 and $18,056, respectively, and included debt discount amortization of $1,495 and $6,092, respectively.
The $1,536,000 Convertible Note matures on January 31, 2022 accrues interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company'sCompany’s Class B Common Stock at a conversion price of $115.00 per share, (i) at the Seller'sSeller’s option, or (ii) at the Buyer'sBuyer’s option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company'sCompany’s Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $140.00 per share. The maximum number of shares issuable pursuant to the Convertible Note is 15,962 shares of the Company'sCompany’s Class B Common Stock. Interest expense on the Convertible Note for the three-monthsthree and six-month periods ended March 31,June 30, 2021 was $51,483$57,688 and included $36,792 of$109,171, respectively, and included debt discount amortization as compared to interest expense of $51,560 which included $19,693 of debt discount amortization for the same period of 2020.
NOTE 9 –
STOCKHOLDER EQUITYShare-Based Compensation
On June 30, 2017, the Company'sCompany’s shareholders approved a Stock Incentive Plan (the "Plan"(as amended, the “Plan”) reservingallowing for issuance under the Plan in the formissuance of restricted stock units ("RSUs"(“RSUs”), stock options ("Options"(“Options”), Performance Units, and other equity awards (collectively "Awards"“Awards”) for our employees, consultants, directors, independent contractors, and certain prospective employees who have committed to become an employee (each an "Eligible Individual"“Eligible Individual”). As of up to 12.0% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan to increase30, 2021, the number of shares authorized for issuance under the Plan from 12.0% of the Company's issued and outstanding shares of Class B Common Stock from time to time to 100,000 shares of Class B Common Stock (the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 100,000 shares of Class B Common Stock to 200,000 shares of Class B Common Stock (the "Second Plan Amendment"). On August 25, 2020, the Company's stockholders approved another amendment to the Plan to increase the number of shares authorized for issuance under the Plan from 200,000 shares of Class B Common Stock towas 700,000 shares of Class B Common Stock (the "Third Plan Amendment").
The Company estimates the fair value of awards granted under the Plan on the date of grant. In the case of time or service based RSU awards, the fair value based onis the share price of the Class B Common Stock on the date of the award. Performance Awards use the share prices of the Class B Common Stock but the Company, both at grant and each subsequent quarter, considers whether to apply a apply discount to the fair value in situations where the Company believes there is risk that the relevant performance metrics may not be met. Options are calculated using the Black-Scholes option valuation model while market-condition based awards are estimated using a Monte Carlo simulation model as these awards are tied to a market condition. Both the Black-SholesBlack-Scholes and Monte-Carlo simulations utilize multiple input variables to determine the probability of the Company’s Class B stock price being at certain prices over certain time periods, resulting in an implied value to the holder; the 2020 market-condition based awards assumed expected volatility to be 125% and a risk-free interest rate of 1.0%. We generally expense the grant-date fair value of all awards on a straight-line basis over the vesting period.
| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Restricted Stock Units | $ | 694,722 | $ | 701,000 | $ | 2,420,504 | $ | 1,532,179 | ||||||||
| Options | 6,553 | 15,291 | 14,787 | 30,582 | ||||||||||||
| Total stock-based compensation | $ | 701,275 | $ | 716,391 | $ | 2,435,291 | $ | 1,562,761 | ||||||||
Three-Months Ended March 31, | ||
2021 | 2020 | |
| Restricted Stock Units | $1,725,782 | $831,079 |
| Options | 8,234 | 15,291 |
| Total stock-based compensation | $1,734,016 | $846,370 |
As of March 31,June 30, 2021, the total unrecognized compensation expense related to outstanding equity awards was approximately $3,116,253,$2,357,183, which the Company expects to recognize over a weighted-average period of approximately 1210.6 months. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.
January 2020 Public Offering
On January 14, 2020, pursuant to an underwritten public offering, the Company issued 900,000 shares of Class B Common Stock at a public price of $11.40 per share (the "2020“2020 Public Offering"Offering”). On January 16, 2020, the Company received notice of the Underwriters'Underwriters’ intent to exercise the over-allotment option in full (the "Over-allotment Exercise"“Over-allotment Exercise”). On January 17, 2020, the Company issued an additional 135,000 shares of Class B Common Stock and closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, net proceeds from the 2020 Public Offering, after deducting the 8.0% underwriter'sunderwriter’s commission and $75,000 for underwriter expenses, were $10,780,080. Certain of the Company'sCompany’s officers and directors participated in the 2020 Public Offering.
The Company used the net proceeds of the 2020 Public Offering for working capital and general corporate purposes, which included further technology development, increased spending on marketing and advertising and capital expenditures necessary to grow the business.
Reverse Stock Split
On May 18, 2020, the Company filed a Certificate of Change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. There was a 7,131 fractional share adjustment as a result of rounding up to the nearest whole share in connection with the Reverse Stock Split. The authorized preferred stock of the Company was not impacted by the Reverse Stock Split. The Company has retrospectively adjusted the per share and share amounts included in this Quarterly Report on Form 10-Q for the Reverse Stock Split.
April 2021 Public Offering
On April 8, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with B. Riley Securities, Inc., as representative to the several underwriters named on Schedule A to the Underwriting Agreement (the “Underwriters”), relating to the Company’s public offering (the “Offering”) of 1,048,998 shares of Class B Common Stock (the “Firm Shares”) and an additional 157,349 shares of Class B Common Stock (the “Additional Shares,” and together with Firm Shares, the “Shares”).
The Underwriters agreed to purchase the Firm Shares at a price of $38.00 per share. The Firm Shares were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the SEC pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (File No. 333-234340) under the Securities Act, and an effective registration statement filed with the SEC on Form S-3MEF (File. No. 333-255139) under the Securities Act.
On April 13, 2021, the Company issued the Firm Shares and closed the Offering at a public price of $38.00 per share for net proceeds to the Company of $36,797,406 after deducting the underwriting discount and offering fees and expenses payable by the Company.
The Underwriting Agreement included customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the agreement and were subject to limitations agreed upon by the contracting parties.
The Company intends to use the net proceeds of the Offering for working capital and general corporate purposes.Pending these uses, the Company may invest the net proceeds in short-term interest-bearing investment grade instruments.
NOTE 10 – SELLING, GENERAL AND ADMINISTRATIVE
The following table summarizes the detail of selling, general and administrative expense for the three-months ended March 31,June 30, 2021 and 2020:
| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Compensation and related costs | $ | 8,332,880 | $ | 5,146,791 | $ | 14,314,343 | $ | 13,326,891 | ||||||||
| Advertising and marketing | 1,961,543 | 541,921 | 3,557,847 | 3,490,077 | ||||||||||||
| Professional fees | 1,098,045 | 1,075,831 | 2,765,141 | 1,918,534 | ||||||||||||
| Technology development and software | 424,063 | 235,013 | 827,538 | 857,159 | ||||||||||||
| General and administrative | 6,296,620 | 4,174,731 | 10,049,626 | 9,638,053 | ||||||||||||
| $ | 18,113,151 | $ | 11,174,287 | $ | 31,514,495 | $ | 29,230,714 | |||||||||
Three-Months Ended March 31, | ||
2021 | 2020 | |
| Compensation and related costs | $5,981,459 | $8,180,100 |
| Advertising and marketing | 1,596,304 | 2,948,155 |
| Professional fees | 1,667,096 | 842,703 |
| Technology development and software | 403,475 | 622,144 |
General and administrative | 3,753,010 | 5,463,324 |
$13,401,344 | $18,056,426 | |
NOTE 11 – LOSS CONTINGENCIES AND INSURANCE RECOVERIES
On March 3, 2020, a severe tornado struck the greater Nashville area (the “Nashville Tornado”) causing significant damage to the Company'sCompany’s facilities including contents and inventory held for sale. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The loss was comprised of three components: (1) inventory loss, assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, assessed by the insurance carrier at $2,783,000; and (3) loss of business income, for which the company has coverage in the amount of $6,000,000.
All three components of the Company'sCompany’s loss claim have been submitted to its insurers. The Company'sCompany’s inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss; however, the insurer has advanced $5,615,268 in July 2020 and $3,134,732 in July 2021. Therefore, the total payments received thus far against the final settlement.settlement are $8,750,000. The insurer has agreed to pay $2,778,000 on the building and personal property loss, reflecting limits of $2,783,000 net of a $5,000 deductible. The insurer has made an interim paymentpayments on the building and personal property loss of $2,269,507 to the landlord.$2,625,787. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
As a result of the damage caused by the tornado,Nashville Tornado, the Company concluded that the utility of the inventory damaged by the storm was impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or market and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss of the current period.
NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION
The following table includes supplemental cash flow information, including noncash investing and financing activity for the three-monthssix-months ended March 31,June 30, 2021 and 2020:
| Six-Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash paid for interest | $ | 2,258,169 | $ | 1,818,671 | ||||
Three-months Ended March 31, | ||
2021 | 2020 | |
| Cash paid for interest | $1,707,931 | $1,588,030 |
The following table provides a reconciliation of cash and restricted cash reported within the accompanying Condensed Consolidated balance sheets that sum to the total of the same amounts shown in the accompanying Condensed Consolidated statements of cash flows as of March 31:
| June 30, 2021 | June 30, 2020 | |||||||
| Cash and cash equivalents | $ | 24,972,223 | $ | 3,061,091 | ||||
| Restricted cash (1) | 3,049,056 | 5,533,832 | ||||||
| Total cash, cash equivalents, and restricted cash | $ | 28,021,279 | $ | 8,594,923 | ||||
March 31, 2021 | December 31, 2020 | |
| Cash and cash equivalents | $80,049 | $1,466,831 |
| Restricted cash (1) | 2,049,056 | 2,049,056 |
| Total cash, cash equivalents, and restricted cash | $2,129,105 | $3,515,887 |
| (1) | Amounts included in restricted cash represent the deposits required under the Company’s lines of credit. |
NOTE 13 – INCOME TAXES
CARES Act
In MarchJune 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"“CARES Act”) was enacted in response to the COVID-19Covid-19 pandemic. The Company does not expect the provisions of the legislation to have a significant impact on the effective tax rate or income tax payable and deferred income tax positions of the Company.
No current provision for Federal income taxes was recorded for the three-monthsthree and six-months ended March 31,June 30, 2021 and 2020 due to the Company'sCompany’s operating losses. The Company has provided a full valuation allowance on the net deferred tax assets. In assessing the recovery of the net deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment.
NOTE 14 – LOSS PER SHARE
The Company computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighed-average number of shares of common stock outstanding during the period. The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, 393,878328,101 of RSUs, 2,751 of stock options, 16,530 of warrants to purchase shares of Class B Common Stock and 982,107 shares of Class B Common Stock issuable in connection with convertible debt are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive.
The Company applies the two-class method of calculating earnings per share, but as the rights of the Series B Non-Voting Convertible Preferred Stock and Class A and Class B Common Stock are identical, except in respect of voting, basic and diluted earnings per share are the same for all classes. Weighted average number of shares outstanding of Class A Common Stock, Class B Common Stock, and Series B Preferred for the three and six months ended at March 31,June 30, 2021 were 50,000, 2,253,525,3,242,616, and 0, and 50,000, 2,775,665 and 0, respectively.
NOTE 15 – RELATED PARTY TRANSACTIONS
As of December 31, 2020, the Company had promissory notes of $370,556$370,556 and accrued interest of $9,370$9,370 due to Blue Flame Capital, LLC (“Blue Flame”), an entity controlled by a Denmar Dixon, a director of the Company. The promissory notes were issued in connection with the completion of the 2016 Private Placement on March 31, 2017 and exchanged in January 2020 for New Investor Notes. The Blue Flame Notes plus accrued interest were paid in full on January 31, 2021. Interest expense on the promissory notes for the three-monthsthree and six months ended March 31,June 30, 2021, was $3,158 and $91,844, respectively, which included debt discount amortization of $0 and $42,001, respectively. Interest expense on the promissory notes for the three and six months ended June 30, 2020, was $3,158$9,269 and $91,844,$51,052, respectively, which and included debt discount amortization of $0 and $42,001, respectively. The interest was charged to interest expense in the Condensed Consolidated Statements of Operations.
See Note 8“Note 7 – Notes Payable and Lines of CreditCredit” for a discussion of the NextGen Note.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Lease Commitments
We determine whether an arrangement is a lease at inception and whether such leases are operating or financing leases. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. We use these options in determining our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determine the present value of the lease payments.
Operating lease expense is recognized on a straight-line basis over the lease term. Total operating lease expenses for the three-monthsthree and six-months ended March 31,June 30, 2021 were $626,944 and $1,179,645, respectively. Total operating lease expenses for the three and six-months ended June 30, 2020 was $533,370were $336,874 and $527,044,$863,919, respectively. The current portion of the Company'sCompany’s operating lease liabilities as of March 31,June 30, 2021 is $1,696,079$1,750,126 and is included in accounts payable and accrued liabilities. The long-term portion of the Company'sCompany’s operating lease liabilities as of March 31,June 30, 2021 is $3,978,158$3,519,475 and is included in other liabilities.
The weighted-average remaining lease term and discount rate for the Company'sCompany’s operating leases are as follows:
| June 30, 2021 | ||||
| Weighted-average remaining lease term | 3.1 years | |||
| Weighted-average discount rate | 6.0 | % | ||
Supplemental cash flow information related to operating leases for the three-months ended March 31,June 30, 2021 was as follows:
| June 30, 2021 | ||||
| Cash payments for operating leases | $ | 978,605 | ||
The following table summarizes the future minimum payments for operating leases at March 31,June 30, 2021 due in each year ending December 31,
| 2021 | $ | 1,012,344 | ||
| 2022 | 1,971,141 | |||
| 2023 | 1,224,208 | |||
| 2024 | 835,309 | |||
| 2025 | 553,334 | |||
| Thereafter | 285,500 | |||
| Total lease payments | 5,881,836 | |||
| Less imputed interest | (612,235 | ) | ||
| Present value of lease liabilities | $ | 5,269,601 |
| 2021 | $1,485,913 |
| 2022 | 1,970,141 |
| 2023 | 1,224,208 |
| 2024 | 855,309 |
| 2025 | 553,334 |
| Thereafter | 285,500 |
| Total lease payments | 6,374,405 |
| Less imputed interest | (700,168) |
| Present value of lease liabilities | $5,674,237 |
Legal Matters
From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of March 31,June 30, 2021 and December 31, 2020, the Company does not believe that the ultimate resolution of any legal actions, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, and capital resources.
Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third-party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
NOTE 17 – CONCENTRATIONS
The Company is dependent on third-party providers of wholesale vehicle auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of these principal providers or a significant reduction in service availability could have a material adverse effect on the Company. The Company believes that its relationships with these providers are satisfactory.
NOTE 18 - SEGMENT REPORTING
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have three3 reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution principally of motorcycles and other powersports vehicles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services between dealerships and auctions. Our vehicle logistics and transportation service reportable segment has been determined to represent one operating segment and reporting unit.
The following table summarizes revenue, operating income (loss), Depreciationdepreciation and Amortizationamortization and interest expense which are the measure by which management allocates resources to its segments to each of our reportable segments.
| Powersports | Automotive | Vehicle Logistics and Transportation | Eliminations(1) | Total | ||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||
| Total assets | $ | 99,476,249 | $ | 41,996,779 | $ | 14,173,060 | $ | (27,573,300 | ) | $ | 128,072,788 | |||||||||
| Revenue | $ | 27,978,693 | $ | 127,286,568 | $ | 14,517,592 | $ | (1,437,230 | ) | $ | 168,345,623 | |||||||||
| Operating income (loss) | $ | (2,905,012 | ) | $ | 2,757,082 | $ | 914,196 | $ | — | $ | 766,266 | |||||||||
| Depreciation and amortization | $ | 598,374 | $ | 26,725 | $ | 6,729 | $ | — | $ | 631,828 | ||||||||||
| Interest expense | $ | (1,330,967 | ) | $ | (587,751 | ) | $ | (1,807 | ) | $ | — | $ | (1,920,525 | ) | ||||||
| Change in derivative liability | $ | (2,235,670 | ) | $ | — | $ | — | $ | — | $ | (2,235,670 | ) | ||||||||
| Three Months Ended June 30, 2020 | ||||||||||||||||||||
| Total assets | $ | 44,036,796 | $ | 64,873,563 | $ | 10,295,397 | $ | (26,704,369 | ) | $ | 92,501,387 | |||||||||
| Revenue | $ | 8,382,952 | $ | 68,294,841 | $ | 8,251,605 | $ | (588,105 | ) | $ | 84,341,293 | |||||||||
| Operating income (loss) | $ | (4,393,325 | ) | $ | 6,058,005 | $ | 724,712 | $ | — | $ | 2,389,392 | |||||||||
| Depreciation and amortization | $ | 481,675 | $ | 24,796 | $ | 1,851 | $ | — | $ | 508,322 | ||||||||||
| Interest expense | $ | (998,106 | ) | $ | (484,302 | ) | $ | — | $ | — | $ | (1,482,408 | ) | |||||||
| Change in derivative liability | $ | 137,488 | $ | — | $ | — | $ | — | $ | 137,488 | ||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||
| Total assets | $ | 99,476,249 | $ | 41,996,779 | $ | 14,173,060 | $ | (27,573,300 | ) | $ | 128,072,788 | |||||||||
| Revenue | $ | 38,833,577 | $ | 211,357,422 | $ | 24,547,943 | $ | (2,129,310 | ) | $ | 272,609,632 | |||||||||
| Operating income (loss) | $ | (8,081,523 | ) | $ | 4,399,400 | $ | 1,626,275 | — | $ | (2,055,848 | ) | |||||||||
| Depreciation and amortization | $ | 1,170,888 | $ | 53,449 | $ | 6,729 | — | $ | 1,231,066 | |||||||||||
| Interest expense | $ | (2,577,289 | ) | $ | (948,278 | ) | $ | (3,778 | ) | — | $ | (3,529,345 | ) | |||||||
| Change in derivative liability | $ | (2,256,322 | ) | — | — | — | $ | (2,256,322 | ) | |||||||||||
| Six Months Ended June 30, 2020 | ||||||||||||||||||||
| Total assets | $ | 44,036,796 | $ | 64,873,563 | $ | 10,295,397 | $ | (26,704,369 | ) | $ | 92,501,387 | |||||||||
| Revenue | $ | 31,812,355 | $ | 181,927,108 | $ | 17,241,786 | $ | (2,490,695 | ) | $ | 228,490,554 | |||||||||
| Operating income (loss) | $ | (11,817,241 | ) | $ | (7,068,095 | ) | $ | 1,381,795 | — | $ | (17,503,541 | ) | ||||||||
| Depreciation and amortization | $ | 944,211 | $ | 83,403 | $ | 3,703 | — | $ | 1,031,317 | |||||||||||
| Interest expense | $ | (2,574,895 | ) | $ | (1,123,975 | ) | $ | (296 | ) | — | $ | (3,699,166 | ) | |||||||
| Change in derivative liability | $ | 20,673 | — | — | — | $ | 20,673 | |||||||||||||
| Gain on early extinguishment of debt | $ | 188,164 | — | — | — | $ | 188,164 | |||||||||||||
Powersports | Automotive | Vehicle Logistics and Transportation | Eliminations(1) | Total | |
Three Months Ended March 31, 2021 | |||||
| Total assets | $48,002,418 | $56,970,224 | $12,650,687 | $(27,284,439) | $90,338,890 |
| Revenue | $10,854,884 | $84,070,855 | $10,030,352 | $(692,080) | $104,264,011 |
| Operating income (loss) | $(5,175,280) | $1,641,087 | $712,079 | $- | $(2,822,114) |
| Depreciation and amortization | $572,515 | $26,725 | $- | $- | $599,240 |
| Interest expense | $(1,246,322) | $(360,527) | $(1,971) | $- | $(1,608,820) |
| Change in derivative liability | $(20,652) | $- | $- | $- | $(20,652) |
| Three Months Ended March 31, 2020 | |||||
| Total assets | $54,583,357 | $75,520,584 | $8,470,887 | $(26,610,708) | $111,964,120 |
| Revenue | $23,139,080 | $114,198,079 | $8,990,181 | $(1,902,590) | $144,424,750 |
| Operating income (loss) | $(7,189,585) | $(13,360,432) | $657,083 | $- | $(19,892,934) |
| Depreciation and amortization | $462,537 | $58,607 | $1,851 | $- | $522,995 |
| Interest expense | $(1,464,627) | $(751,834) | $(296) | $- | $(2,216,757) |
| Change in derivative liability | $(116,815) | $- | $- | $- | $(116,815) |
| Gain on early extinguishment of debt | $188,164 | $- | $- | $- | $188,164 |
| (1) | Intercompany investment balances related to the acquisitions of Wholesale and Wholesale Express, LLC (“Wholesale Express”) and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Condensed Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Condensed Consolidated Statements of Operations. |
NOTE 19 – PROPOSED ACQUISITION
RideNow Definitive Agreement
On March 12, 2021, the Company entered intoannounced a Plan of Mergerdefinitive agreement to combine with the RideNow dealership group, the nation’s largest powersports retailer, to create the only omnichannel customer experience in powersports and Equity Purchase Agreementthe largest publicly traded powersports dealership platform (the “RideNow Agreement”Transaction”) with RO Merger Sub I, Inc., an Arizona corporation and wholly owned subsidiary. Under the terms of the Company (“Merger Sub I”), RO Merger Sub II, Inc., an Arizona corporation and wholly owned subsidiary ofdefinitive agreement, the Company (“Merger Sub II”), RO Merger Sub III, Inc., an Arizona corporation and wholly owned subsidiary of the Company (“Merger Sub III”), RO Merger Sub IV, Inc., an Arizona corporation and wholly owned subsidiary of the Company (“Merger Sub IV,” and togetherwill combine with Merger Sub I, Merger Sub II, and Merger Sub III, the “Merger Subs”), C&W Motors, Inc., an Arizona corporation, Metro Motorcycle, Inc., an Arizona corporation, Tucson Motorcycles, Inc., an Arizona corporation, and Tucson Motorsports, Inc., an Arizona corporation, William Coulter, an individual (“Coulter”), Mark Tkach, an individual (“Tkach” and together with Coulter, the “Principal Owners”), and certain other persons who own equity interests in the Acquired Companies (as defined in the RideNow Agreement) and execute a Seller Joinder (as defined in the RideNow Agreement) (together with the Principal Owners, the “Sellers” and each, a “Seller”), and Tkach, as the representative of the Sellers (the “Sellers’ Representative”). The Acquired Companies own and operate powersports retail dealershipsup to 46 entities operating under the RideNow brand which include sales, financing, and parts and service of new and used motorcycles, ATVs, UTVs, scooters, side by sides, sport bikes, cruisers, watercraft, and other vehicles and ancillary businesses and activities relating thereto.
Warrant
In connection with the Commitment Letter, in lieu of a commitment fee, the Company has agreed to issue to Oaktree a warrant to purchase a number of shares of Class B Common Stock at an exercise price per share to be determined either at Closing or at termination of the Commitment Letter (the “Warrant”). If issued at Closing, the Warrant will be for that number of shares equal to $40,000,000 divided by the lowest price per share at which equity is issued in connection with financing the RideNow Transaction, whichwhose price shall also be the exercise price. If issued in connection with a termination of the Commitment Letter, the Warrant will be issued to purchase that number of shares equal to five percent (5%) of the Company'sCompany’s fully diluted market capitalization at the close of business on the day after a termination of the Commitment Letter is publicly announced divided by the weighted average price of the Company'sCompany’s Class B Common Stock for the five days immediately preceding such date, which price shall also be the exercise price. The Warrant is immediately exercisable upon the Closing or five days after the termination of the Commitment Letter and expires eighteen (18) months after the Closing or termination of the Commitment Letter.
The Company has accounted for the Warrant agreement as a liability with the initial offset as a deferred financing charge as the Warrant was issued in lieu of a commitment fee connected to the proposed financing of the RideNow Transaction. If the Transaction and related financing is closed, the deferred financing charge will be reclassedreclassified as a debt discount to the Credit Facility. The initial warrant liability and deferred financing charge recognized was $10,950,000 The agreement to issue the Warrant is an equity linked contract considered not indexed to its own stock and does not meet the equity classification guidance. The warrant liability is subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net onchange in derivative liability in the statementCondensed Consolidated Statement of operations.Operations. For the three months ended June 30, 2021, the fair value of the warrant liability was increased $2,224,216 to $13,174,216. The Company will continue to adjust the liability for changes in fair value of the Warrant until the earlier of the exercise or expiration of the Warrant or until it meets equity classification. The fair value of the Warrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 3 inputs. There was no gain or loss recorded related to the Warrant liability during the three-months ended March 31, 2021 as there was no significant change in the fair value between March 12, 2021 to March 31, 2021. The recognition of the warrant liability and deferred financing charge was aare non-cash item.
NOTE 20 – SUBSEQUENT EVENTS
Sale of loan finance portfolio
On July 2, 2021, the Company’s wholly-owned consumer finance subsidiary sold to a third-party its right, title and interest in a portfolio of consumer loans for $6,814,390, which represented 98% of the unpaid balances of all loans so sold. Pursuant to the sale, all servicing rights were to be transferred to the buyer.
Amendments to the Oaktree Warrant
On July 15, 2021, the Company and Oaktree amended the Oaktree Warrant to clarify that the share price at which the Company sold shares in the April 2021 Public Offering may be used in determining the initial price per share at which the Warrant may be exercised.
Amendments to the RideNow Agreement
On April 8,July 20, 2021 the Company entered into an underwriting agreement (the “Underwriting Agreement”a Second Amendment to RideNow Agreement that extended the outside date for completing the Transaction to September 12, 2021. Such right of termination was previously July 30, 2021. The Amendment also modified the allocation of equity compensation to Sellers employees post-closing.
Special Meeting of Shareholders
On July 30, 2021, the Company held its Special Meeting of Stockholders (“Special Meeting”) with B. Riley Securities, Inc., as representative to the several underwriters named on Schedule A to the Underwriting Agreement (the “Underwriters”), relating toat which the Company’s public offering (the “Offering”)stockholders approved the following matters: (i) the issuance of 1,048,998shares of RumbleOn Class B Common Stock in connection with the business combination of the Company and RideNow; (ii) the amendment of RumbleOn’s Articles of Incorporation to increase the number of shares of authorized Class B Common Stock from 4,950,000 to 100,000,000 shares; (iii) the amendment of RumbleOn’s 2017 Equity Incentive Plan to increase the number of shares of Class B Common Stock (the “Firm Shares”)issuable thereunder from 700,000 to 2,700,000 shares and to extend the Incentive Plan for an additional 157,349ten years, and (iv) the approval of an adjournment of the Special Meeting, if necessary, to solicit additional proxies in favor of the foregoing proposal. At the Special Meeting, the stockholders voted to approve each of the proposals.
Amendment to Articles of Incorporation
On March 9, 2021, the Board of Directors approved, subject to stockholder approval, an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Class B Common Stock to 100,000,000 (the “Additional Shares,” and together with Firm Shares,“Authorized Stock Amendment”). At the “Shares”).
Receipt of Insurance Proceeds
In connection with the Offering at a public price of $38.00 per share for net proceeds to the Company of approximately $36.7
Item 2.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("(“MD&A"&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our most recent Annual Report filed on Form 10-K, as well as our
Overview and Outlook
We are a technology driven, motor vehicle dealercompany and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.manner for consumers and dealers.
We operate an infrastructure-light platform that facilitates the ability of all participants in the supply chain, including RumbleOn, other dealers and consumers to Buy-Sell-Trade-Finance-Transport pre-owned vehicles. Our goal is to transform the way VIN-specific pre-owned vehicles are bought and sold by providing users with the most comprehensive, efficient, timely and transparent transaction experiences. While our initial customer facing emphasis through most of 2018 was on motorcycles and other powersports vehicles, we continue to enhance our platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Of the 3,500 vehicles we sold during the three-months ended March 31, 2021, 2,494 (71%) were automotive and 1,006 (29%) were powersports vehicles. For the three-months ended March 31, 2020, we sold 7,420 vehicles of which 4,603 (62%) were automotive and 2,817 (38%) were powersports vehicles.
In August 2020, we launched RumbleOn 3.0, bringing traditional brick and mortar powersports dealers across the country online. Then, in March 2021, we announced a definitive agreement to combine our ecommercee-commerce platform with the RideNow powersports group, the nation'snation’s largest powersports retailer, as discussed further below. The combination of RumbleOn and RideNow willto become the first omnichannel platform in powersports. This channel is a full-service platform that will revolutionize the customer experience. This omnichannel platform will offer the consumer the fastest, easiest, and most transparent transaction online or in store while providing customers the most comprehensive offering that includes:
| ● | Buy, Sell or Trade without Leaving Your Home |
| ● | Virtual Inventory Listings Online and In Store |
| ● | Physical Retail and Service Locations |
| ● | Proprietary Supply Aggregation |
| ● | Apparel, Parts, Service and Accessories |
| ● | Vehicle Transportation and Logistics |
| ● | Online Cash Offers |
| ● | Proprietary Secondary Online Financing |
The combination of RumbleOn and RideNow, which we expect to close in the third quarter of 2021, is well positioned to capitalize on the seculartrending changes in consumer behavior that have been accelerated by COVID-19.the events of the last 18 months. These changes include:
Shift in Demographics
(1)| ● | New demographic groups are coming to powersports - increasing diversity, from gender to ethnicity to age |
| ● | Number of female motorcycle owners nearly doubled from 2000 to 2020 and the average age of female riders declined 10 years |
| ● | Powersports give Millennials and Gen Z the “experience culture” they crave |
| ● | Largest powersports manufacturer stated 70% of retail sales were to new customers |
| ● | These generations prefer entry point provided by pre-owned |
| ● | Growth in first-time riders drives lifetime enthusiast |
Transition to Outdoor Lifestyle
(1)| ● | Outdoor sports equipment surged |
| ● | Escaping the indoors |
| ● | Social yet socially distant |
| ● | Interactive exercise |
Digital Adoption Accelerated
(1)| ● | E-commerce grew from 15% in 2019 to over 44% in 2020 |
| ● | Today 2/3 of new car shoppers are comfortable completing the entire process online |
We believe today’s consumer is experienced focused; RumbleOn’s acquisition platform for pre-owned vehicles enables the combined business to capture incremental market share as new riders continue to enter the category.
| (1) | Source: NPD, National Marine Manufacturers Association, U.S. Department of Commerce, Cox Automotive, Boston Consulting Group, McKinsey & Company. |
For additional information relating to combine with the RideNow dealership group, the nation’s largest powersports retailer, to create the only omnichannel customer experience in powersports and the largest publicly traded powersports dealership platform (the “RideNow Transaction”). Under the terms of the definitive agreement, we will combine with up to 46 entities operating under the RideNow brand for a total consideration of up to $575.4 million, consisting of $400.4 million of cash and approximately 5.8 million shares of our Class B Common Stock. We will finance the cash consideration through a combination of up to $280.0 million of debt and the remainder through the issuance of new equity. We have has entered into a commitment letter with Oaktree Capital Management, L.P. (“Oaktree”) to provide for the debt financing, subject to certain conditions (the “Oaktree Financing”). The number of shares to be issued to RideNow is subject to increase as described in the definitive agreement. The RideNow Transaction is subject to successful completion of the debt and equity financing, RumbleOn stockholder approval, manufacturer approval, other federal and state regulatory approvals, and other customary closing conditions as described in the definitive agreement. We expect to close the RideNow Transaction duringsee “Note 19 - Proposed Transaction” in the second or third quarter of 2021. The foregoing description ofaccompanying Notes to the definitive agreement and debt financing does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Plan of Merger and Equity Purchase Agreement, dated March 12, 2021, Registration Rights and Lock-Up Agreement, dated March 12, 2021, Commitment Letter, dated March 12, 2021, and Warrant, dated March 12, 2021, copies of which are incorporated by reference to this report as Exhibits 2.1, 10.2, 10.3 and 4.1. See the section titled Proposed AcquisitionCondensed Consolidated Financial Statements included in this MD&A for a discussion of the RideNow Transaction and Oaktree Financing.Quarterly Report on Form 10-Q.
The extent to which the COVID-19 outbreak continues to impact our business, sales, results of operations, financial condition, and liquidity will depend on the success of the roll out of the vaccines and the efficacy of the vaccines and other future developments, which are highly uncertain and cannot be predicted. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future. Our current focus is on continuing to position the Company for a strong recovery when this crisis is over. During 2020 and through the end of the first quarter of 2021, we managed our business activities to meet the parameters of our capital structure and available liquidity by
Reportable Segments and Key Operations Metrics
Reportable segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principlesunder GAAP for segment reporting: (1) powersports, (2) automotive, and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution of principally motorcycles and other powersports vehicles such as ATVs and UTVs, while the automotive segment distributes cars and trucks. The Company has the requisite licenses to sell both powersports and automotive vehicles through retail and wholesale channels, however the mix of such sales may vary substantially quarter to quarter. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services primarily between dealerships and auctions.
For the Three-Months Ended March 31, 2021 | For the Three-Months Ended March 31, 2020 | |||||||
Revenue | Revenue% | Gross Profit | GP% | Revenue | Revenue% | Gross Profit | GP% | |
| Segment | ||||||||
| Powersports | $10,854,884 | 10.4% | $2,978,493 | 27.4% | $23,139,080 | 16.0% | $2,580,794 | 11.2% |
| Automotive | 84,070,855 | 80.6% | 6,211,047 | 7.4% | 114,198,079 | 79.1% | 5,844,574 | 5.1% |
| Transportation | 9,338,272 | 9.0% | 1,988,930 | 21.3% | 7,087,591 | 4.9% | 1,999,532 | 28.2% |
| Gross profit before impairment loss | 104,264,011 | 100.0% | 11,178,470 | 10.7% | 144,424,750 | % - | 10,424,900 | 7.2% |
| Impairment loss (1) | - | -% | - | -% | - | %- | (11,738,413) | (8.1)% |
$104,264,011 | 100.0% | $11,178,470 | 10.7% | $144,424,750 | 100.0% | $(1,313,513) | (0.9)% | |
We regularly review a number of key operating metrics, to evaluate our vehicle distribution business,segments, measure our progress, and make strategicoperating decisions. Our key operating metrics reflect what we believe will be the keyprimary drivers of our business, including increasing brand awareness, maximizing the opportunity to source the purchase of low-cost pre-owned vehicles from consumers and dealers, whileand enhancing the selection and timing of vehicles we make available for sale to our customers. Our key operating metrics also demonstrate ourenhance management’s ability to translate these driversthis information into sales through multiple sales channels. The Key Operations Metrics tables below for the Powersports and to monetize these retail sales through a variety of product offerings. ForAutomotive segments for the three monthsand six-months ended March 31,June 30, 2020 the amounts reflected below and in the tables that follow in this section do not include expenditures of $343,820 and $796,365, for the powersports and automotive segments, respectively, that represent costs that are not attributed to specific vehicles.
Three Months Ended March 31, | ||
| Powersports: | 2021 | 2020 |
| Vehicles sold | 1,006 | 2,817 |
| Average days to sale | 19 | 43 |
| Total vehicle revenue | $10,854,884 | $23,139,080 |
| Gross Profit | $2,978,493 | $2,926,263 |
Three Months Ended March 31, | ||
Automotive(1): | 2021 | 2020 |
| Vehicles sold | 2,494 | 4,603 |
| Average days to sale | 21 | 31 |
| Total vehicle revenue | $84,070,855 | $113,632,267 |
| Gross Profit | $6,211,047 | $6,348,968 |
Key Operation Metrics - Powersports and other insignificant indirect cost for the three months ended March 31, 2020.Automotive Segments
Vehicles Sold
We define vehicles sold as the number of pre-owned vehicles sold to consumersthrough both wholesale and dealersretail channels in each period, net of returns under our various return policies. We view vehicles sold as a key measure for several reasons. First, vehiclesreturns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit, since vehicle sales enable multipleprofit. Vehicles sold also enables complementary revenue streams, including financing, vehicle service contracts and trade-ins. Second, vehiclessuch as financing. Vehicles sold increases theour base of available customers for referralsand improves brand awareness and repeat sales. Third, vehiclesVehicles sold is an indicator of our abilityalso provides the opportunity to successfully scale our logistics, fulfillment, and customer service operations.
Average Days to SaleSelling Price
Average selling price represents the averageaggregate revenue divided by the number of days between vehicle acquisition by us and delivery to a customer for all pre-owned vehicles sold in a period. However, this metric does not include any pre-owned vehicles that remain unsold at period end. We view average days to sale as a useful metric due to its impact on pre-owned vehicle average selling price.sold.
Revenue
Revenue is primarily comprised of pre-owned vehicle sales. We sell pre-owned vehicles through multiple consumer and dealer sales channels. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling to the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The number of pre-owned vehicles sold to any given channel may vary from period to period based on customer demand, market conditions and available inventory.these factors. Subject to the impact of COVID-19Covid-19 and the resulting Demand/Supply Imbalances on our results, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building as well asand direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
Gross Profit
Gross profit is generated on pre-owned vehicle sales fromreflects the difference between the vehicle selling price and ourthe cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, reconditioning cost, and inbound transportation cost (collectively, we refer to reconditioning and transportation costs as “Recon and Transport”). The aggregate dollar gross profit achieved fromand gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the consumer and dealer sales channels are different.sale price. Pre-owned vehicles sold to consumers through our website generally have the highest dollar gross profit per vehicle since the vehicle is sold directly to the consumer. Pre-owned vehicles sold to dealers through our website are sold at a price below the retail price offered to consumers, thus the dealer and RumbleOn are sharing the gross profit.consumers. Pre-owned vehicles sold to dealers through auctions are sold at market.market prices and include a sell fee to the dealer. Factors affecting gross profit from period to period include the mix of pre-owned vehicles we acquire and hold in inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances in our sales channels, which could temporarily lead to average selling prices and gross profits increasing or decreasing in any given channel.
Three Months Ended March 31, | ||
2021 | 2020 | |
| Key Operation Metrics: | ||
| Total vehicles sold | 1,006 | 2,817 |
| Total Powersports Revenue | $10,854,884 | $23,139,080 |
| Gross Profit | $2,978,493 | $2,926,263 |
| Gross Profit per vehicle | $2,961 | $1,039 |
| Gross Margin | 27.4% | 12.6% |
| Average selling price | $10,790 | $8,214 |
| Consumer: | ||
| Vehicles sold | - | 280 |
Total Consumer Revenue(1) | $- | $2,656,880 |
| Gross Profit | $- | $646,412 |
| Gross Profit per vehicle | $- | $2,309 |
| Gross Margin | -% | 24.3% |
| Average selling price | $- | $9,489 |
| Dealer: | ||
| Vehicles sold | 1,006 | 2,537 |
| Total Dealer Revenue | $10,854,884 | $20,482,200 |
| Gross Profit | $2,978,493 | $2,279,850 |
| Gross Profit per vehicle | $2,961 | $899 |
| Gross Margin | 27.4% | 11.1% |
| Average selling price | $10,790 | $8,073 |
Three Months Ended March 31, | ||
2021 | 2020 | |
| Key Operation Metrics: | ||
| Total vehicles sold | 2,494 | 4,603 |
| Total Automotive Revenue | $84,070,855 | $113,632,267 |
| Gross Profit | $6,211,047 | $6,348,968 |
| Gross Profit per vehicle | $2,490 | $1,379 |
| Gross Margin | 7.4% | 5.6% |
| Average selling price | $33,709 | $24,687 |
| Consumer: | ||
| Vehicles sold | 206 | 646 |
| Total Consumer Revenue | $10,086,415 | $17,584,737 |
| Gross Profit | $1,014,742 | $2,108,722 |
| Gross Profit per vehicle | $4,926 | $3,264 |
| Gross Margin | 10.1% | 12.0% |
| Average selling price | $48,963 | $27,221 |
| Dealer: | ||
| Vehicles sold | 2,288 | 3,957 |
| Total Dealer Revenue | $73,984,440 | $96,047,530 |
| Gross Profit | $5,196,305 | $4,240,245 |
| Gross Profit per vehicle | $2,271 | $1,072 |
| Gross Margin | 7.0% | 4.4% |
| Average selling price | $32,336 | $24,273 |
Key Operation Metrics - Vehicle Logistics and Transportation Services Segment
Revenue
Three Months Ended March 31, | ||
2021 | 2020 | |
| Revenue (1) | $10,030,352 | $8,990,181 |
| Vehicles Delivered | 18,907 | 21,027 |
| Gross Profit | $1,988,930 | $1,999,532 |
| Gross Profit Per Vehicle Delivered | $105 | $95 |
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer'scustomer’s contract. The freight brokerage agreements are fulfilled by independent third-party transporters who are obligated tomust meet our performance obligations and standards. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms. Revenue is recognized as risks and rewards of transportation of the vehicle is transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross. In the normal course of operations, Wholesale Express also provides transportation services to Wholesale.
Vehicles Delivered
We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private party individuals.parties. Vehicles delivered isare the primary driver of revenue and in turn profitability in the vehicle logistics and transportation services segment.
Gross Profit
Gross profit is generated on the difference between the price received from a customer under a freight brokerageagreement for the transport of a vehicle from a point of origin to a designated destination minus our cost to contract an independent third-party transporter to fulfill our obligation under the freight brokerage agreement with the customer. We define gross profit per vehicle delivered as the aggregate gross profit in a given period divided by the number of pre-owned vehicles delivered in that period.
Key Operations Metrics – Powersports
| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Key Operation Metrics: | ||||||||||||||||
| Total vehicles sold | 2,411 | 859 | 3,417 | 3,676 | ||||||||||||
| Revenue per vehicle | $ | 11,605 | $ | 9,759 | $ | 11,365 | $ | 8,654 | ||||||||
| Revenue | $ | 27,978,693 | $ | 8,382,952 | $ | 38,833,577 | $ | 31,812,355 | ||||||||
| Powersports revenue as a percentage of Company revenue | 16.5 | % | 9.9 | % | 14.1 | % | 13.8 | % | ||||||||
| Gross Profit | $ | 6,957,201 | $ | 854,142 | $ | 9,935,694 | $ | 4,070,728 | ||||||||
| Gross Profit per vehicle | $ | 2,886 | $ | 994 | $ | 2,908 | $ | 1,107 | ||||||||
| Gross Margin | 24.9 | % | 10.2 | % | 25.6 | % | 12.8 | % | ||||||||
| Consumer(1): | ||||||||||||||||
| Vehicles sold | — | 145 | — | 425 | ||||||||||||
| Revenue per vehicle | $ | — | $ | 10,060 | $ | — | $ | 9,684 | ||||||||
| Consumer Revenue | $ | — | $ | 1,458,767 | $ | — | $ | 4,115,647 | ||||||||
| Gross Profit | $ | — | $ | 213,407 | $ | — | $ | 859,819 | ||||||||
| Gross Profit per vehicle | $ | — | $ | 1,472 | $ | — | $ | 2,023 | ||||||||
| Gross Margin | — | % | 14.6 | % | — | % | 20.9 | % | ||||||||
| Dealer: | ||||||||||||||||
| Vehicles sold | 2,411 | 714 | 3,417 | 3,251 | ||||||||||||
| Revenue per vehicle | $ | 11,605 | $ | 9,698 | $ | 11,365 | $ | 8,519 | ||||||||
| Dealer Revenue | $ | 27,978,693 | $ | 6,924,185 | $ | 38,833,577 | $ | 27,696,708 | ||||||||
| Gross Profit | $ | 6,957,201 | $ | 640,735 | $ | 9,935,694 | $ | 3,210,909 | ||||||||
| Gross Profit per vehicle | $ | 2,886 | $ | 897 | $ | 2,908 | $ | 988 | ||||||||
| Gross Margin | 24.9 | % | 9.3 | % | 25.6 | % | 11.6 | % | ||||||||
| (1) | We suspended the sale of powersports vehicles direct to consumers 2nd half of 2020; there can be no assurances that we do not resume such sales. |
Key Operations Metrics – Automotive(1)
| Three-Months Ended June 30, | Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Key Operation Metrics: | ||||||||||||||||
| Total vehicles sold | 3,300 | 2,835 | 5794 | 7438 | ||||||||||||
| Revenue per vehicle | $ | 38,572 | $ | 24,090 | $ | 36,479 | $ | 24,459 | ||||||||
| Revenue | $ | 127,286,568 | $ | 68,294,841 | $ | 211,357,422 | $ | 181,927,108 | ||||||||
| Automotive revenue as a percentage of Company revenue | 75.0 | % | 80.4 | % | 76.9 | % | 78.8 | % | ||||||||
| Gross Profit | $ | 10,168,847 | $ | 5,801,826 | $ | 16,379,892 | $ | 12,150,793 | ||||||||
| Gross Profit per vehicle | $ | 3,081 | $ | 2,046 | $ | 2,827 | $ | 1,634 | ||||||||
| Gross Margin | 8.0 | % | 8.5 | % | 7.7 | % | 6.7 | % | ||||||||
| Consumer: | ||||||||||||||||
| Vehicles sold | 181 | 297 | 387 | 943 | ||||||||||||
| Revenue per vehicle | $ | 48,794 | $ | 28,544 | $ | 48,884 | $ | 27,638 | ||||||||
| Consumer Revenue | $ | 8,831,667 | $ | 8,477,654 | $ | 18,918,082 | $ | 26,062,391 | ||||||||
| Gross Profit | $ | 1,203,577 | $ | 1,138,835 | $ | 2,218,319 | $ | 3,247,556 | ||||||||
| Gross Profit per vehicle | $ | 6,650 | $ | 3,834 | $ | 5,732 | $ | 3,444 | ||||||||
| Gross Margin | 13.6 | % | 13.4 | % | 11.7 | % | 12.5 | % | ||||||||
| Dealer: | ||||||||||||||||
| Vehicles sold | 3,119 | 2,538 | $ | 5,407 | $ | 6,495 | ||||||||||
| Average selling price | $ | 37,978 | $ | 23,569 | $ | 35,591 | $ | 23,998 | ||||||||
| Dealer Revenue | $ | 118,454,901 | $ | 59,817,187 | $ | 192,439,340 | $ | 155,864,717 | ||||||||
| Gross Profit | $ | 8,965,270 | $ | 4,662,991 | $ | 14,161,573 | $ | 8,903,237 | ||||||||
| Gross Profit per vehicle | $ | 2,874 | $ | 1,837 | $ | 2,619 | $ | 1,371 | ||||||||
| Gross Margin | 7.6 | % | 7.8 | % | 7.4 | % | 5.7 | % | ||||||||
| (1) | For the six-months ended June 30, 2020, excludes the impairment loss resulting from the Nashville Tornado. |
Key Operation Metrics - Vehicle Logistics and Transportation Services Segment
| Three-Months Ended June 30, | Six-Months Ended | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Vehicles Delivered | 23,502 | 19,191 | 42,409 | 40,076 | ||||||||||||
| Revenue (1) | $ | 14,517,592 | $ | 8,251,605 | $ | 24,547,943 | $ | 17,241,786 | ||||||||
| Logistics/Transportation revenue as a percentage of total Company revenue | 8.6 | % | 9.7 | % | 8.9 | % | 7.5 | % | ||||||||
| Gross Profit | $ | 2,385,197 | $ | 1,800,766 | $ | 4,374,127 | $ | 3,800,299 | ||||||||
| Gross Profit Per Vehicle Delivered | $ | 101 | $ | 94 | $ | 103 | $ | 95 | ||||||||
| (1) | Intercompany freight services provided to Wholesale of $1,437,230 and $588,105 and $2,129,310 and $2,490,695, respectively, for the three and six-months ended June 30, 2021 and 2020 are eliminated in the Condensed Consolidatedfinancial statements. |
RESULTS OF OPERATIONS
The following table providestables provide our results of operations for the three-monthsthree and six-months ended March 31,June 30, 2021 and 2020, including key2020. This financial information relating to our business and operations. This financial informationthe disclosure that follows should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.10-Q and our discussion of Key Operating Metrics appearing above in this MD&A.
| For the Three-Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Powersports | Automotive | Total Vehicle Sales(1) | Vehicle Logistics and Transportation Services | Elimination(2) | Total | |||||||||||||||||||
| Revenue | $ | 27,978,693 | $ | 127,286,568 | $ | 155,265,261 | $ | 14,517,592 | $ | (1,437,230 | ) | $ | 168,345,623 | |||||||||||
| Cost of revenue | 21,021,492 | 117,117,721 | 138,139,213 | 12,132,395 | (1,437,230 | ) | 148,834,378 | |||||||||||||||||
| Gross profit | $ | 6,957,201 | $ | 10,168,847 | $ | 17,126,048 | $ | 2,385,197 | $ | — | $ | 19,511,245 | ||||||||||||
For the Three Months ended March 31, 2021 | |||||
Powersports | Automotive | Vehicle Logistics and Transportation Services | Elimination(1) | Total | |
| Revenue: | |||||
| Pre-owned vehicle sales: | |||||
| Powersports | $10,854,884 $ | $- | $- | $- | $10,854,884 |
| Automotive | - | 84,070,855 | - | - | 84,070,855 |
| Transportation and vehicle logistics | - | 10,030,352 | (692,080) | 9,338,272 | |
| Total revenue | 10,854,884 | 84,070,855 | 10,030,352 | (692,080) | 104,264,011 |
| Cost of revenue: | |||||
| Powersports | 7,876,391 | - | - | - | 7,876,391 |
| Automotive | - | 77,859,808 | - | - | 77,859,808 |
| Transportation | - | - | 8,041,422 | (692,080) | 7,349,342 |
| Total cost of revenue before impairment loss | 7,876,391 | 77,859,808 | 8,041,422 | (692,080) | 93,085,541 |
| Impairment loss | - | - | - | - | - |
| Total cost of revenue | 7,876,391 | 77,859,808 | 8,041,422 | (692,080) | 93,085,541 |
| Gross profit | $2,978,493 | $6,211,047 | $1,988,930 | $- | $11,178,470 |
| (1) | Total vehicle sales represent powersports and automotive vehicle sales. |
| (2) | Intercompany freight services from Wholesale Express are eliminated in the Condensed Consolidatedfinancial statements. |
| For the Three-Months Ended June 30, 2020 | ||||||||||||||||||||||||
| Powersports | Automotive | Total Vehicle Sales(1) | Vehicle Logistics and Transportation Services | Elimination(2) | Total | |||||||||||||||||||
| Revenue | $ | 8,382,952 | $ | 68,294,841 | $ | 76,677,793 | $ | 8,251,605 | $ | (588,105 | ) | $ | 84,341,293 | |||||||||||
| Cost of revenue | 7,528,810 | 62,493,015 | 70,021,825 | 6,450,839 | (588,105 | ) | 75,884,559 | |||||||||||||||||
| Gross profit | $ | 854,142 | $ | 5,801,826 | $ | 6,655,968 | $ | 1,800,766 | $ | — | $ | 8,456,734 | ||||||||||||
| (1) | Total vehicle sales represent powersports and automotive vehicle sales. |
| (2) | Intercompany freight services from Wholesale Express are eliminated in the Condensed Consolidatedfinancial statements. |
| For the Six-Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Powersports | Automotive | Total Vehicle Sales(1) | Vehicle Logistics and Transportation Services | Elimination(1)(2) | Total | |||||||||||||||||||
| Revenue | $ | 38,833,577 | $ | 211,357,422 | $ | 250,190,999 | $ | 24,547,943 | $ | (2,129,310 | ) | $ | 272,609,632 | |||||||||||
| Cost of revenue | 28,897,883 | 194,977,530 | 223,875,413 | 20,173,816 | (2,129,310 | ) | 241,919,919 | |||||||||||||||||
| Gross profit | $ | 9,935,694 | $ | 16,379,892 | $ | 26,315,586 | $ | 4,374,127 | $ | — | $ | 30,689,713 | ||||||||||||
For the Three Months ended March 31, 2020 | |||||
Powersports | Automotive | Vehicle Logistics and Transportation Services | Elimination(1) | Total | |
| Revenue: | |||||
| Pre-owned vehicle sales: | |||||
| Powersports | $23,139,080 $ | $- | $- | $- | $23,139,080 |
| Automotive | - | 114,198,079 | - | - | 114,198,079 |
| Transportation and vehicle logistics | - | - | 8,990,181 | (1,902,590) | 7,087,591 |
| Total revenue | 23,139,080 | 114,198,079 | 8,990,181 | (1,902,590) | 144,424,750 |
| Cost of revenue: | |||||
| Powersports | 20,558,286 | - | - | - | 20,558,286 |
| Automotive | - | 108,353,505 | - | - | 108,353,505 |
| Transportation | - | - | 6,990,649 | (1,902,590) | 5,088,059 |
| Impairment loss | - | 11,738,413 | - | - | 11,738,413 |
| Total cost of revenue | 20,558,286 | 120,091,918 | 6,990,649 | (1,902,590) | 145,738,263 |
| Gross profit | $2,580,794 | $(5,893,839) | $1,999,532 | $- | $(1,313,513) |
| (1) | Total vehicle sales represent powersports and automotive vehicle sales. |
| (2) | Intercompany freight services from Wholesale Express are eliminated in the Condensed Consolidatedfinancial statements. |
| For the Six-Months Ended June 30, 2020 | ||||||||||||||||||||||||
| Powersports | Automotive | Total Vehicle Sales(1) | Vehicle Logistics and Transportation Services | Elimination(2) | Total | |||||||||||||||||||
| Revenue | $ | 31,812,355 | $ | 181,927,108 | $ | 213,739,463 | $ | 17,241,786 | $ | (2,490,695 | ) | $ | 228,490,554 | |||||||||||
| Cost of revenue (3) | 28,085,447 | 182,311,093 | 210,396,540 | 13,441,487 | (2,490,695 | ) | 221,347,332 | |||||||||||||||||
| Gross profit | $ | 3,726,908 | $ | (383,985 | ) | $ | 3,342,923 | $ | 3,800,299 | $ | — | $ | 7,143,222 | |||||||||||
| (1) | Total vehicle sales represent Powersports and Automotive vehicle sales. |
| (2) | Intercompany Transportation and Logistics Services are eliminated in the condensed consolidated financial statements. |
| (3) | Automotive cost of revenue includes $11,738,413 of impairment loss on automotive inventory |
Powersports and Automotive SegmentsSegment
Three-Months Ended June 30, 2021 Versus 2020
Powersports Vehicle Revenue
Total powersports vehicle revenue increased by $19,595,741 to $27,978,693 for the three-months ended March 31,June 30, 2021 andcompared to $8,382,952 for the same period in 2020, foralthough the 2021 period did not include any sales to consumers as discussed further below. The increase in powersports and automotive segments, including key financial information relatingrevenue was primarily due to these segments. Our powersports and automotive segments consistsan increase in the total number of the distribution of powersports and automotivepre-owned vehicles as further described below. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
For the Three-Months Ended March 31, | ||
2021 | 2020 | |
| Revenue: | ||
| Pre-owned Vehicle Sales: | ||
| Powersports | $10,854,884 | $23,139,080 |
| Automotive | 84,070,855 | 114,198,079 |
| Total vehicle revenue | 94,925,739 | 137,337,159 |
| Cost of Revenue: | ||
| Powersports | 7,876,391 | 20,558,286 |
| Automotive | 77,859,808 | 108,353,505 |
| Cost of revenue before impairment loss on vehicle inventory | 85,736,199 | 128,911,791 |
| Impairment loss on vehicle inventory | - | 11,738,413 |
| Total cost of revenue | 85,736,199 | 140,650,204 |
| Gross Profit | 9,189,540 | (3,313,045) |
| Selling, General and Administrative | 12,124,493 | 16,571,828 |
| Depreciation and Amortization | 599,240 | 521,144 |
| Operating loss | (3,534,193) | (20,406,017) |
| Interest expense | (1,606,849) | (2,216,460) |
| Change in derivative liability | (20,652) | (116,815) |
| Gain on early extinguishment of debt | - | 188,664 |
| Net loss before provision for income taxes | (5,161,694) | (22,550,628) |
| Benefit for income taxes | - | - |
| Net loss | $(5,161,694) | $(22,550,628) |
Powersports Gross Profit
Powersports gross profit on vehicle revenue increased $6,103,059 to $6,957,201 for the three-months ended June 30, 2021 compared to $854,142 for the same period of 2020. The increase in gross profit was primarily due to the increase in the total vehicles sold in 2021 compared to 2020 and the increase in the average gross profit per vehicle sold to $2,886 for the three-months ended June 30, 2021 compared to $994 for the same period in 2020. The increase in average gross profit per vehicle was caused by the higher average selling prices for vehicle sales in 2021 versus 2020 as a result of the Demand/Supply Imbalances. The higher sales prices were offset by an increase in the overall average acquisition cost per vehicle sold in 2021 compared to 2020 to $8,669 for the three-months ended June 30, 2021 compared to $8,166 for the same period in 2020. Recon and Transport costs per vehicle sold in 2021 was approximately $50, down over 90% versus the corresponding period in 2020 as the Company optimized its transportation process for purchased inventory and suspended sales to consumers.
Six-Months Ended June 30, 2021 Versus 2020
Powersports Vehicle Revenue
Total vehicle revenue increased by $7,021,222 to $38,833,577 for the six-months ended June 30, 2021 compared to $31,812,355 for the same period of 2020. The increase in revenue was primarily due to an increase in the average selling price per vehicle sold to $11,365 for the six-months ended June 30, 2021 from $8,654 for the same period of 2020. This increase in average selling price was offset by a decrease in the total number of pre-owned vehicles sold to 3,5003,417 for the three-monthssix-months ended March 31,June 30, 2021 as compared to 7,4203,676 for the same period of 2020,, which was partially offset by an increase in the average selling price per vehicle sold to $10,790 for the three-months ended March 31, 2021 from $8,214for the same period of 2020for powersports and $33,709 for the three-months ended March 31, 2021 from $24,687for the same period of 2020for automotive. The decrease in vehicles sold and increase in average selling priceprices resulted from (i) the adverse impact of COVID-19 pandemic on commercial activity resulting in lower levels of inventory available forpurchase at acceptable acquisition price levels causing lower revenue but higher average selling prices and gross margins due to the supply and demand imbalance; (ii) our level of available liquidity which required that wereduce our historical purchasing levels of inventory for sale;Demand/Supply Imbalance; (iii) our continued disciplined approach to revenue volumevolume; and margin growth in connection with the prescriptive steps implemented in 2020 to accelerate profitability; and (iv) eliminating(iii) suspending the sale of powersportpowersports vehicles direct to consumers as we continued to shift our consumer activity to RumbleOn V3 and earmarked available inventory to dealers through Dealer Direct. As the impact of COVID-19 abates over time, we anticipate that revenue volume will return to or exceed levels experienced before COVID-19effected commercial activity.However, we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
Powersports Gross Profit
Powersports gross profit on vehicle revenue decreased $54,914,005increased $6,208,786 to $85,736,199$9,935,694 for the three-monthssix-months ended March 31,June 30, 2021 compared to $140,650,204$3,726,908 for the same period of 2020. The decreaseincrease in cost of revenuegross profit was primarily due to the increase in the average gross margin per vehicle sold to $2,908 for the three-months ended June 30, 2021 compared to $1,107 for the same period in 2020 resulting from the Demand/Supply Imbalances. In addition, the gross profit was impacted by the decrease in the total number of pre-owned vehicles sold for the three-months ended March 31,June 30, 2021 asto 3,417 compared to the same period of 2020 and for the three-months ended March 31, 2020 includes a $12,808,618 adjustment which primarily reflects the write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the significant damage to the Company's operating facilities and automotive inventory held for sale in Nashville as a result of the March 3, 2020 tornado.
For the Three-Months Ended March 31 | ||
2021 | 2020 | |
| Powersports | ||
| Vehicle revenue: | ||
| Consumer | $- | $2,656,880 |
| Dealer | 10,854,884 | 20,482,200 |
| Total vehicle revenue | $10,854,884 | $23,139,080 |
| Vehicle gross profit: | ||
| Consumer | $- | $646,412 |
| Dealer | 2,978,493 | 2,279,850 |
| Total vehicle gross profit | $2,978,493 | $2,926,262 |
| Vehicles sold: | ||
| Consumer | - | 280 |
| Dealer | 1,006 | 2,537 |
| Total vehicles sold | 1,006 | 2,817 |
| Gross profit per vehicle: | ||
| Consumer | $- | $2,309 |
| Dealer | $2,961 | $899 |
| Total | $2,961 | $1,039 |
| Gross margin per vehicle: | ||
| Consumer | -% | 24.3% |
| Dealer | 27.4% | 11.1% |
| Total | 27.4% | 12.6% |
| Average vehicle selling price: | ||
| Consumer | $- | $9,489 |
| Dealer | $10,790 | $8,073 |
| Total | $10,790 | $8,214 |
For the Three-Months Ended March 31, | ||
2021 | 2020 | |
| Automotive | ||
| Vehicle revenue: | ||
| Consumer | $10,086,415 | $18,150,549 |
| Dealer | 73,984,440 | 96,047,530 |
| Total vehicle revenue | $84,070,855 | $114,198,079 |
| Gross Profit (1): | ||
| Consumer | $1,014,742 | $2,469,250 |
| Dealer | 5,196,305 | 3,375,324 |
| Total vehicle gross profit | $6,211,047 | $5,844,574 |
| Vehicles sold: | ||
| Consumer | 206 | 646 |
| Dealer | 2,288 | 3,957 |
| Total vehicles sold | 2,494 | 4,603 |
| Gross profit per vehicle: | ||
| Consumer | $4,926 | $3,822 |
| Dealer | 2,271 | 853 |
| Total | $2,490 | $1,270 |
| Gross margin per vehicle: | ||
| Consumer | 10.1% | 13.6% |
| Dealer | 7.0% | 3.5% |
| Total | 7.4% | 5.1% |
| Average vehicle selling price: | ||
| Consumer | $48,963 | $28,097 |
| Dealer | $32,336 | $24,273 |
| Total | $33,709 | $24,809 |
Automotive
Three-Months Ended June 30, 2021 Versus 2020
Automotive Revenue
Total automotive vehicle revenue increased by $58,991,726 to $127,286,567 for the three-months ended March 31, 2021 from $24,809 for the same period of 2020. The decrease in vehicles sold and increase in average selling price per vehicle was a result of: (i) the adverse impact of COVID-19 pandemic on commercial activity resulting in lower levels of inventory available forpurchase at acceptable acquisition price levelscausing lower revenue but higher average selling prices and gross margins due to the supply and demand imbalance; (ii)our level of available liquidity which required that wereduce our historical purchasing levels of inventory for sale;and (iii) our continued disciplined approach to revenue volume and margin growth in connection with the prescriptive steps implemented in 2020 to accelerate profitability. As the impact of COVID-19 abates over time, we anticipate that revenue will return to or exceed levels experienced before COVID-19effected commercial activity.However, we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
For the Three-Months Ended March 31, | ||
2021 | 2020 | |
| Vehicle Logistics and Transportation Services | ||
| Total revenue | $10,030,352 | $8,990,181 |
| Cost of revenue | 8,041,422 | 6,990,649 |
| Gross profit | 1,988,930 | 1,999,532 |
| Selling, general and administrative | 1,276,851 | 1,340,598 |
| Depreciation and amortization | - | 1,851 |
| Operating income | 712,079 | 657,083 |
| Interest expense | 1,971 | 296 |
| Net Income before income tax | $710,108 | $656,787 |
| Vehicles delivered | 18,907 | 21,027 |
| Revenue per delivery | $531 | $428 |
| Gross profit per delivery | $105 | $95 |
| Gross margin per delivery | 19.8% | 22.2% |
Automotive Gross Profit
Automotive vehicle gross profit increased by $4,367,021 to $10,168,847 for the three-months ended June 30, 2021 compared to $5,801,826 for the same period in 2020. The increase in gross profit in the three-months period ended June 30, 2021 was driven by both an increase in the number of vehicles sold from 2,835 in the corresponding prior year period to 3,300, coupled with a 16.4% increase in the average gross profit per vehicle from $2,046 in the three-months period ended June 30, 2021 to $3,081 in the three-months period ended June 30, 2020. On a per vehicle basis, year over year aggregate Recon and Transportation increased by only 5%, despite per unit transportation having risen $110 per vehicle. Gross profit per vehicle in the automotive retail and wholesale sectors have benefited from the Demand/Supply Imbalances during the last 12 months, including the three-months ended June 30, 2021.
Six-Months Ended June 30, 2021 Versus 2020
Automotive Revenue
Total automotive vehicle revenue increased by $29,430,314 to $211,357,422 for the six-months ended June 30, 2021 compared to $181,927,108 for the same period of 2020 despite a 22.1% decrease in the total number of automotive units sold to 5,794. The increase in automotive revenue was primarily due to an increase in sales to dealers as sales to consumers decreased by $7,144,309 while sales to dealers increased by $36,574,623, coupled with average selling price in 2021 that was $12,020 higher per automotive vehicle. Both unit sales and average revenue per transaction in 2021 benefited from the Demand/Supply Imbalances throughout all vehicle distribution channels, while the corresponding period in 2020 was materially impacted by the Nashville Tornado and the effect of shelter-in-place orders and other responses to Covid-19.
Automotive Gross Profit
Before the impairment loss on inventory of $11,738,413, automotive vehicle gross profit increased by $5,025,464 to $16,379,892 for the six-months ended June 30, 2021 compared to $11,354,428 for the same period in 2020. Both unit sales and average revenue per transaction in 2021 benefited from the Demand/Supply Imbalances throughout all vehicle distribution channels, while 2020 was materially impacted by the Nashville Tornado and the effect of shelter-in-place orders and other responses to Covid-19.
Vehicle Logistics and Transportation Services Segment
Three-Months Ended June 30, 2021 Versus June 30, 2020
Vehicle Logistics and Transportation Services Revenue
Total revenue increased by $6,265,987 to $14,517,592 for the three-months ended June 30, 2021 compared to $8,251,605 for the same period in 2020. The increase in total revenue for the three-month period ended March 31,June 30, 2021 resulted from the transport of
In the normal course of operations, the Company utilizes transportation services of Wholesale Express. For the three-months ended March 31,June 30, 2020 and 2021 intercompany freight services provided by Express to the Company were $1,437,230 and $588,105, respectively, and were eliminated in the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q
Vehicle Logistics and Transport Services Gross Profit
Total gross profit for the three-months ended June 30, 2021 increased $584,431 to $2,385,197, or $101 per unit transported, as compared to $1,800,766, or $94 per unit, transported for the same period in 2020. The increased gross profit was attributed to an increase in the number of vehicles delivered as well as the increase in the gross profit per vehicle delivered.
Six-Months Ended June 30, 2021 Versus 2020
Vehicle Logistics and Transportation Services Revenue
Total revenue increased by $7,306,157 to $24,547,943 for the six-months ended June 30, 2021 compared to $17,241,786 for the same period in 2020. The increase in total revenue for the six-month period ended June 30, 2021 resulted from the transport of 42,409 vehicles at an average revenue per vehicle delivered of $579 compared to revenue from the transport of 40,076 vehicles at an average revenue per vehicle delivered of $430 for the same period of 2020. The increase in vehicles transported and increase in average revenue per vehicle delivered was a result of the Demand/Supply Imbalances throughout 2020 and 2021 across all vehicle distribution channels.
In the normal course of operations, the Company utilizes transportation services of Wholesale Express. For the six-months ended for the same period in 2020 intercompany freight services provided by Express to the Company were $692,080 $2,129,310 and $1,902,590, respectively and was eliminated in the Condensed Consolidated financial statements.
Vehicle Logistics and Transport Services Gross Profit
Total gross profit for the three-months ended March 31,June 30, 2021 was $1,988,930increased $573,828 to $4,374,127 or $105$103 per unit transported as compared to $1,999,533$3,800,299 or $95$95 per unit for the same period in 2020.
Selling, General and Administrative
| For the Three-Months Ended June 30, | For the Six-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Selling general and administrative: | ||||||||||||||||
| Compensation and related costs | $ | 8332,880 | $ | 5,146,791 | $ | 14,314,343 | $ | 13,326,891 | ||||||||
| Advertising and marketing | 1,961,543 | 541,921 | 3,557,847 | 3,490,077 | ||||||||||||
| Professional fees | 1,098,045 | 1,075,831 | 2,765,141 | 1,918,534 | ||||||||||||
| Technology development and software | 424,063 | 235,013 | 827,538 | 857,159 | ||||||||||||
| General and administrative | 6,296,620 | 4,174,730 | 10,049,626 | 9,638,053 | ||||||||||||
| $ | 18,113,151 | $ | 11,174,286 | $ | 31,514,495 | $ | 29,230,714 | |||||||||
For the Three-Months Ended March 31, | ||
2021 | 2020 | |
| Selling general and administrative: | ||
| Compensation and related costs | $5,981,459 | $8,180,100 |
| Advertising and marketing | 1,596,304 | 2,948,155 |
| Professional fees | 1,667,096 | 842,703 |
| Technology development and software | 403,475 | 622,144 |
| General and administrative | 3,753,010 | 5,463,324 |
$13,401,344 | $18,056,426 | |
Selling, general and administrative expenses decreasedincreased by $4,655,082 to $13,401,344$6,938,865 and $2,283,781, respectively, for the three-monthsthree and six-months ended March 31,June 30, 2021 compared to $18,056,426 for the same period of 2020. The decrease was a result of: (i) our continued disciplined approach to sales volume and margin growth in connection with the prescriptive steps implemented in 2020 to accelerate profitability which resulted in the sale of fewer vehicles and a corresponding reduction in related compensation, selling and marketing expenses for the three-month ended March 31, 2021 as compared to the same periodperiods in 2020. In each case other than professional fees, which were impacted in the first quarter of 2020; (ii) reduction2021 by expenses related to the RideNow transaction, the Company spent more in our operating cost and expense structurein connection with the introductionfirst quarter of Dealer Direct, RumbleOn Classified and more transaction fee based business; and (iii) the supply and demand imbalance created by the impact of COVID-19 pandemic on commercial activity resulting in lower levels of inventory available forpurchase at acceptable acquisition price levelscausing lower revenue and a corresponding reduction in related compensation, selling and marketing expenses for the three-month ended March 31, 2021 as2020 compared to the same periodsecond quarter of 2020.
Depreciation and Amortization
Depreciation and amortization increased by $76,245 to $599,240$123,506 and $199,750, respectively, for the three-monthsthree-month and six-month periods ended March 31,June 30, 2021, compared to $522,995 for the same periodperiods of 2020. The increase in depreciation and amortization is a result of the cumulative investments made in connection with the expansion and growth of the business which for the three-monthsthree-month and six-month periods ended March 31,June 30, 2021, included capitalized technology acquisition and development costs of $394,962 as compared to $290,376 for the same period of 2020.$510,341 and $905,303, respectively. For the three-monthsthree-month and six-month periods ended March 31,June 30, 2021, amortization of capitalized technology development was $546,683 as$570,875 and $1,117,557, respectively, compared to $437,943$451,634 and $889,576, respectively, for the same periodperiods of 2020. Depreciation and amortization on vehicle, furniture, equipment and leasehold improvements was $52,557 as$60,953 and $113,509, respectively, compared to $85,052$56,322 and $141,740, respectively, for the same periodperiods of 2020.
Interest Expense
Interest expense decreasedincreased by $607,937 to $1,608,820$438,117 for the three-monthsthree-month period ended March 31,June 30, 2021 compared to $2,216,757$1,482,408 for the same period of 2020. Interest expense consists of interest on the: (i) Private Placement Notes; (ii) NextGen Promissory Note; (iii) Credit Facility andfor the NextGear Credit Line (together, the "Line of Credit-Floor Plans"); (iv) PPP Loans; (v) Convertible Notes-Autosport; (vi) Bridge Loan; (vii) RumbleOn Finance Facility; and (viii) Convertible Senior Notes. The decrease resulted from interest on a lower average level of debt outstanding during the three-monthssix-month period ended March 31,June 30, 2021 asdecreased by $169,821 compared to $3,699,166 for the same period ofin 2020. Interest expense on the Private Placement Notesconsists of contract interest plus debt discount amortization. The increase in interest expense for the three-monthsthree months ended March 31,June 30, 2021 was $10,491 and included $0 of debt discount amortization as comparedis primarily due to interest expense of $91,893 which included $75,601 ofan increase in the debt discount amortization for the same periodconvertible notes of 2020. Interest$352,484, and an increase in the interest expense on the NextGen Promissory Note for the three-months ended March 31, 2021 was $7,534 as compared to $21,927 for the same periodlines of 2020. Interest expense on the Linecredit of Credit-Floor Plans for the three-months ended March 31, 2021 was $303,918 as compared to $777,552 for the same period of 2020. Interest expense on the Autosport convertible notes for the three-months ended March 31, 2021 was $51,483 and included $36,792 of debt discount amortization as compared to interest expense of $51,560 which included $19,693 of debt discount amortization for the same period of 2020. Interest expense on the Convertible Senior Notes for the three-months ended March 31, 2021 was $1,175,954, which included $522,048 of debt amortization as compared to interest expense of $1,267,576, which included $693,123 of debt amortization for the same period of 2020. Interest expense on the PPP loans for the three-months ended March 31, 2021 was $13,345. There was no$132,378 offset by a reduction in interest expense on the PPP loansnotes payable of $46,745. The decrease in interest expense for the three-monthssix-month period ended March 31, 2020. Interest expense on the Bridge Loan for the three-months ended March 31,June 30, 2021 was $16,667. These was nois due to a reduction in interest expense on the Bridge Loan for the three-months ended March 31, 2020. Interest expense on the RumbleOn Finance Linelines of Credit for the three months ended March 31, 2021, was $29,428. These was nocredit of $295,158 and a reduction in interest expense on the RumbleOn Finance Linenotes payable of Credit for the three-months ended March 31, 2020.
Loss Contingencies and Insurance Recoveries
On March 3, 2020, a severe tornado struck the greater Nashville area causingTornado caused significant damage to the Company'sCompany’s facilities including contents and inventory held for sale. The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The loss was comprised of three components: (1) inventory loss, assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, assessed by the insurance carrier at $2,783,000; and (3) loss of business income, for which the company has coverage in the amount of $6,000,000.
All three components of the Company'sCompany’s loss claim have been submitted to its insurers. The Company'sCompany’s inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss; however, the insurer has advanced $5,615,268 in July 2020 and $3,134,732 in July 2021. Therefore, the total payments received thus far against the final settlement.settlement are $8,750,000. The insurer has agreed to pay $2,778,000 on the building and personal property loss, reflecting limits of $2,783,000 net of a $5,000 deductible. The insurer has made an interim paymentpayments on the building and personal property loss of $2,269,507 to the landlord.$2,625,787. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
As a result of the damage caused by the tornadoNashville Tornado the Company concluded that the utility of the inventory damaged by the storm was impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or market and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss of the current period.For the three-months ended March 31, 2020, the Company recorded an impairment loss on inventory of $11,738,413 comprised of $4,453,775 for vehicles that were a total loss and $7,284,638 in loss in value for vehicles partially damaged and subject to repair.The impairment loss is reported in cost of revenue in the March 31, 2020 Condensed Consolidated statements of operations.Additionally, $177,626 of the net book value of the property and equipment destroyed by the tornado Nashville Tornado was expensed. On July 23, 2020,
Derivative Liability
In connection with our various financings, we undertake an analysis of each financial instrument to determine the insurer made an advance against the final settlementappropriate accounting treatment, including which, if any require bifurcation into liability and equity components. We have determined that each of the damage claim on inventory of $5,615,268. This recovery was receivedNew Notes and the Warrant have a liability component that needs to be remeasured each reporting period with the change in value recorded in the second quarterStatements of 2020 and has been recorded as a separate component of operating loss for the year ended December 31, 2020.Operations.
New Notes
In connection with the issuance of the New Notes, a derivative liability was recorded at issuance with an interest make-whole provision of $20,673 based on a lattice model using a stock price of $14.60, and estimated volatility of 55.0% and risk-free rates over the entire 10-year yield curve.
The change in value of the derivative liability for the three-monthsthree and six-months ended March 31,June 30, 2021 was $(20,652).$11,454 and $32,105, respectively, and is included in change in derivative liability in the Condensed Consolidated Statement of Operations. The value of the derivative liability as of March 31,June 30, 2021 and December 31,2020 was $37,346$48,800 and $16,694, respectively.
Oaktree Warrant
In connection with the execution of the Commitment Letter on March 12, 2021, in lieu of a commitment fee, we agreed to issue to the Oaktree Warrant (see “Note 19 – Proposed Acquisition”). The initial fair value of the Oaktree Warrant was calculated by performing a Monte Carlo simulation on the likelihood of the Warrant alternatives (issuance of the Warrant, Termination Warrant, or no Warrant at all). The calculations utilized a combination of level 1 and level 3 inputs including a $38.94 price for RumbleOn’s Class B Common stock, a term of 0.39 years, a risk free rate of -0.02% and volatility of 115% based on the observed historical RumbleOn stock price and guideline companies. The resulting value was $10,950,000, based on a weighting of the stand-alone value of each of three potential outcomes of the Oaktree Warrant. We revalued the Oaktree Warrant as of each of March 31, 2021 and June 30, 2021, by updating relevant inputs and determined that there was no gain or loss between the March 12, 2021 and March 31, 2021, while the fair value of the Oaktree warrant liability on June 30, 2021 of $13,174,216, when compared with the value as of March 31, 2021 resulted in an expense of $2,224,216 recorded in the Statements of Operations.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.
Adjusted EBITDA is defined as net lossincome (loss) adjusted to add back interest expense including(including debt extinguishment andextinguishment), depreciation and amortization, changes in derivative liability and certain recoveries, charges and expenses, such as an insurance recovery, non-cash stock-based compensation costs, acquisition related costs, derivative income, financing activities, litigation expenses, severance, new business development costs, technology implementation costs and expenses, and facility closure and lease terminationother non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
The following tables reconcile Adjusted EBITDA to net loss for the periods presented:
Three-Months Ended | Six-Months Ended | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income (loss) | $ | (3,389,929 | ) | $ | 1,044,472 | $ | (7,841,515 | ) | $ | (20,993,870 | ) | |||||
| Add back: | ||||||||||||||||
| Interest expense (including debt extinguishment) | 1,920,525 | 1,482,408 | 3,529,345 | 3,511,002 | ||||||||||||
| Depreciation and amortization | 631,828 | 508,322 | 1,231,068 | 1,031,317 | ||||||||||||
| Change in derivative and warrant liabilities | 2,235,670 | (137,488 | ) | 2,256,322 | (20,673 | ) | ||||||||||
| EBITDA | 1,398,094 | 2,897,714 | (824,780 | ) | (16,472,224 | ) | ||||||||||
| Adjustments: | ||||||||||||||||
| Impairment loss on automotive inventory | — | — | — | 11,738,413 | ||||||||||||
| Insurance recovery | — | (5,615,268 | ) | — | (5,615,268 | ) | ||||||||||
| Non-cash-stock-based compensation | 701,275 | 716,391 | 1,727,491 | 1,562,761 | ||||||||||||
| Acquisition costs associated with the RideNow Agreement | 860,048 | — | 1,956,701 | — | ||||||||||||
| Litigation expenses | 81,389 | 607,387 | 169,648 | 746,847 | ||||||||||||
| Other non-reoccurring costs | — | 51,387 | 32,985 | — | ||||||||||||
| Adjusted EBITDA | $ | 3,040,806 | $ | (1,342,389 | ) | $ | 3,062,045 | $ | (8,039,471 | ) | ||||||
Three Months Ended March 31, | ||
2021 | 2020 | |
| Net loss | $(4,451,586) | $(22,038,342) |
| Add back: | ||
| Interest expense (including debt extinguishment) | 1,608,820 | 2,028,593 |
| Depreciation and amortization | 599,240 | 522,995 |
| Increase in derivative liability | 20,652 | 116,815 |
| EBITDA | (2,222,874) | (19,369,939) |
| Adjustments: | ||
| Impairment loss on automotive inventory | - | 11,738,413 |
| Non-cash-stock-based compensation | 1,026,216 | 846,370 |
| Acquisition costs associated with the RideNow Agreement | 1,096,653 | - |
| Litigation expenses | 88,259 | 277,995 |
| Other non-reoccurring costs | 32,985 | - |
| Adjusted EBITDA | $21,239 | $(6,507,161) |
Liquidity and Capital Resources
We have incurred losses and negative cash flow from operations since inception through March 31,June 30, 2021 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital, including through debt and equity financing. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Noteinstruments. See “Note 7 — Notes Payable and Lines of Credit, Note” “Note 8 -— Convertible Notes,” and Note“Note 9 — Stockholders Equity.” Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. Due to the impact of COVID-19Covid-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under lines of credit, proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio, rationalizing costs and expenses, and proceeds from our April 8, 2021 equity offering of 1,048,998 Class B common stock that generated net proceeds of $36,700,000; refer to Note 20 — Subsequent Events.
Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company'sCompany’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management'smanagement’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company'sCompany’s assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as conditions evolve as a result of the COVID-19Covid-19 pandemic.
We had the following liquidity resources available as of March 31,June 30, 2021 and December 31, 2020:
| June 30, 2021 | December 31, 2020 | |||||||
| Cash and cash equivalents | $ | 24,972,223 | $ | 1,466,831 | ||||
| Restricted cash (1) | 3,049,056 | 2,049,056 | ||||||
| Total cash, cash equivalents, and restricted cash | 28,021,279 | 3,515,887 | ||||||
| Availability under short-term revolving facilities | 3,142,766 | 2,188,374 | ||||||
| Committed liquidity resources available | $ | 31,164,045 | $ | 5,704,261 | ||||
March 31, 2021 | December 31, 2020 | |
| Cash and cash equivalents | $80,049 | $1,466,831 |
| Restricted cash (1) | 2,049,056 | 2,049,056 |
| Total cash, cash equivalents, and restricted cash | 2,129,105 | 3,515,887 |
| Availability under short-term revolving facilities | - | 2,188,374 |
| Committed liquidity resources available | $2,129,105 | $5,704,261 |
| (1) | Amounts included in restricted cash represent the deposits required under the Company’s short-term revolving facilities. |
On January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering (as defined below), pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes (as defined below) would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the "New Notes"“New Notes”), and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering, after deducting for the payment of accrued interest and offering-related expenses, but exclusive of companyCompany costs were $8,272,375.
On January 14, 2020, the Company closed a public offering at a public price of $11.40 per share (the "2020“2020 Public Offering"Offering”). On January 16, 2020, the Company received notice of the Underwriters'Underwriters’ intent to exercise the over-allotment option in full (the "Over-allotment Exercise"“Over-allotment Exercise”). On January 17, 2020, the Company closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,780,080.
On May 1, 2020, the Company, and its wholly owned subsidiaries Wholesale and Wholesale Express (together, the "Subsidiaries,"“Subsidiaries,” and with the Company, the "Borrowers"“Borrowers”), each entered into loan agreements and related promissory notes (the "SBA“SBA Loan Documents"Documents”) to receive U.S. Small Business Administration Loans (the "SBA Loans"“SBA Loans”) pursuant to the Paycheck Protection Program (the "PPP"“PPP”) established under the CARES Act, in the aggregate amount of $5,176,845 (the "Loan Proceeds"“Loan Proceeds”). The Borrowers received the Loan Proceeds on May 1, 2020, and under the SBA Loan Documents, the SBA Loans had an initial maturity date of April 30, 2022 and an annual interest rate of 1.0%. Payment of principal and interest, to be paid monthly, on the PPP Loans can be prepaid by the Company at any time and was originally deferred through October 30, 2020. On October 7, 2020, the Small Business Administration published guidance of its interpretation of the CARES ACT and of the Paycheck Protection Program Interim Final Rules that indicates, pursuant to the PPP Flexibility Act of 2020, the deferral period for borrow payments of principal, interest and fees on all PPP was extended 10 months after the borrower’s loan forgiveness period. Additionally, the SBA lender agreed to extend the maturity pursuant to the Interim Final Rules. As a result, monthly equal payments of principal and interest will begin September 1, 2021, with the last payment due April 1, 2025.
On June 23, 2020, RumbleOn Finance, LLC, a wholly owned subsidiary of the Company ("(“RumbleOn Finance"Finance”), entered into a loan agreement providing for up to $1,500,000 in proceeds (the "RumbleOn“RumbleOn Finance Facility"Facility”) with CL Rider Finance, L.P. (the "CL Rider"“CL Rider”) as evidenced by the loan commitment dated as of June 17, 2020. In connection with the loan agreement, RumbleOn Finance pledged its assets to CL Rider to secure the RumbleOn Finance Facility and executed a promissory note in favor of the CL Rider pursuant to which the RumbleOn Finance Facility will accrue interest at an initial rate of 4.0% per annum. Accrued interest is payable monthly. Outstanding accrued interest and the principal balance are payable on demand by CL Rider.
In connection with the proposed acquisition of RideNow (See Note“Note 19 — Proposed Acquisition)Acquisition”), on March 12, 2021, the Company and its subsidiary, NextGen Pro, LLC (“NextGen Pro”), executed a secured promissory note with BRF Finance Co., LLC (“BRF Finance”), an affiliate of B. Riley Securities, Inc., pursuant to which BRF Finance has loaned the Company $2,500,000 (the “Bridge Loan”). The Bridge Loan matures on the earlier of September 30, 2021 or upon the issuance of debt or equity above a threshold. The Bridge Loan is secured by certain intellectual property assets held by NextGen Pro as set forth in Exhibit A to the secured promissory note. Interest will accrue on the Bridge Loan until maturity (by acceleration or otherwise) at a rate of 12% annually.
As of March 31,June 30, 2021, and December 31, 2020, excluding operating lease liabilities and the derivative liability, the outstanding principal amount of indebtedness was $65,612,718$60,436,929 and $53,108,353, respectively, summarized in the table below. See Note“Note 7 — Notes Payable and Lines of Credit, Note” “Note 8 –Convertible Notes,” and Note“Note 9 – Stockholders’ EquityStockholders Equity” to our Condensed Consolidated financial statements included above.
| Asset-Based Financing: | June 30, 2021 | December 31, 2020 | ||||||
| Inventory | $ | 21,857,234 | $ | 17,811,626 | ||||
| Total asset-based financing | 21,857,234 | 17,811,626 | ||||||
| Secured notes payable | 4,908,253 | 2,391,361 | ||||||
| Unsecured senior convertible notes | 39,390,000 | 39,774,000 | ||||||
| PPP loans | 5,176,845 | 5,176,845 | ||||||
| Total debt | 71,332,332 | 65,153,832 | ||||||
| Less: unamortized discount and debt issuance costs | (10,895,403 | ) | (12,045,479 | ) | ||||
| Total debt, net | $ | 60,436,929 | $ | 53,108,353 | ||||
| Asset-Based Financing: | March 31, 2021 | December 31, 2020 |
| Inventory | $27,043,101 | $17,811,626 |
| Total asset-based financing | 27,043,101 | 17,811,626 |
| Secured notes payable | 5,297,411 | 2,391,361 |
| Unsecured senior convertible notes | 39,582,000 | 39,774,000 |
| PPP loans | 5,176,845 | 5,176,845 |
| Total debt | 77,099,357 | 65,153,832 |
| Less: unamortized discount and debt issuance costs | (11,486,639) | (12,045,479) |
| Total debt, net | $65,612,718 | $53,108,353 |
The following table sets forth a summary of our cash flows for the three-monthssix-months ended March 31,June 30, 2021 and 2020:
Three-months Ended March 31, | Six-Months Ended June 30, | |||||||||
2021 | 2020 | 2021 | 2020 | |||||||
| Net cash used in operating activities | $(12,937,345) | $(19,467,259) | ||||||||
| Net cash (used in) provided by operating activities | $ | (17,465,209 | ) | $ | 577,859 | |||||
| Net cash used in investing activities | (394,962) | (422,742) | (1,005,305 | ) | (788,899 | ) | ||||
| Net cash provided by financing activities | 11,945,525 | 21,150,210 | 42,975,906 | 2,079,681 | ||||||
| Net (decrease) increase in cash | $(1,386,782) | $1,260,209 | ||||||||
| Net increase in cash | $ | 24,505,392 | $ | 1,868,641 | ||||||
Operating Activities
Our primary sources of operating cash flows result from the sales of used vehicles and ancillary products. Our primary usesuse of cash from operating activities are purchases of inventory, cash used to acquire customers, and personnel-related expenses. For the three-monthssix-months ended March 31,June 30, 2021 net cash used in operating activities was $
Investing Activities
Our primary use of cash for investing activities is for technology development to expand our operations. Net cash used in investing activities was $394,960 and $422,742 duringincreased $216,406 to $1,005,305 for the three-monthssix-months ended March 31,June 30, 2021 and 2020, respectively, a decrease of $27,782. The decrease primarily relatescompared to a reduction in technology spending three-month period ended March 31, 2021 as compared to$788,899 for the same period in 2020.
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash used inprovided by financing activities was $
Off-Balance Sheet Arrangements
As of March 31,June 30, 2021, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
See “Note 1 — Description of Business and Significant Accounting Policies,” included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies since December 31, 2019.2020. There have been no other material changes to our critical accounting policies and use of estimates from those described under "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” included in our most recent Annual Report on Form 10-K.10-K, other than the use of estimates for the Oaktree Warrant, as described above.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, theyThese forward-looking statements are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as "anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate," and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:
Item 3.
This item is not applicable as we are currently considered a smaller reporting company.
Item 4.
Evaluation of Disclosure Controls and
ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31,June 30, 2021. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), the Company'sCompany’s Chief Executive Officer and Chief Financial Officer concluded that the Company'sCompany’s disclosure controls and procedures were effective as of March 31,June 30, 2021.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31,June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the potential impact of COVID-19 on our internal control to minimize the impact on their design and operating effectiveness.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings.
On July 29, 2021, William Miller (the “Plaintiff”) filed a Complaint against the Company and its Board of Directors (collectively, the “Defendants”). Plaintiff alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a) and 78t(a), and Rule 14a-9 promulgated thereunder, 17 C.F.R. § 240.14a-9, in connection with the RideNow Transaction. The Plaintiff seeks injunctive relief preliminarily and permanently enjoining Defendants from proceeding with, consummating, or closing the RideNow Transaction and any vote on the RideNow Transaction, unless and until Defendants disclose and disseminate additional disclosures to Company shareholders. Plaintiff also seeks rescission and rescissory damages if the RideNow Transaction closes, attorneys’ fees and costs, as well as a declaration that Defendants violated Sections 14(a) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder. Defendants have not yet been served with the Complaint. On July 30, 2021, the Company’s shareholders approved the issuance of the shares of Class B Common Stock in connection with the RideNow Transaction and related proposals. The Company believes that the plaintiff’s claims in the foregoing matter are without merit and intends to vigorously defend against them.
Item 1A. Risk Factors.
Except for risks relating to any material legal proceedings.
Item 5.
Other Information.
Amendment to Articles of Incorporation
On March 9, 2021, the Board of Directors approved, subject to stockholder approval, an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Class B Common Stock to 100,000,000 (the “Authorized Stock Amendment”). At the Special Meeting, the Company’s stockholders approved the Authorized Stock Amendment. On August 3, 2021, the Company filed a Certificate of Amendment with the Nevada Secretary of State to effect the Authorized Stock Amendment. A copy of the Certificate of Amendment is attached as Exhibit 3.1 and incorporated herein by reference.
Incentive Plan Amendment
On March 9, 2021, the Board of Directors approved, subject to stockholder approval, an amendment to the Incentive Plan to increase the number of shares of Class B Common Stock issuable under the Incentive Plan from 700,000 to 2,700,000 shares and to extend the Incentive Plan for an additional ten years (the “Incentive Plan Amendment”). At the Special Meeting, the Company’s stockholders approved the Incentive Plan Amendment. A copy of the Incentive Plan Amendment is attached as Exhibit 10.1 and incorporated herein by reference.
Item 6. Exhibits.
| Description | ||
| 2.1 | ||
| Joinder and First Amendment to Plan of Merger and Equity Purchase Agreement, dated | ||
| 3.1 | Certificate of Amendment.* | |
| 10.2 | Fourth Amendment to RumbleOn, Inc. 2017 Stock Incentive Plan.* | |
| Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||
| 31.2 | ||
| Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||
| 32.1 | ||
| Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | ||
| 32.2 | ||
| Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | ||
| 101.INS | ||
| Inline XBRL Instance | ||
| 101.SCH | ||
| Inline XBRL Taxonomy Extension | ||
| 101.CAL | ||
| Inline XBRL Taxonomy Extension Calculation | ||
| 101.DEF | ||
| Inline XBRL Taxonomy Extension Definition | ||
| 101.LAB | ||
| Inline XBRL Taxonomy Extension Label | ||
| 101.PRE | ||
| Inline XBRL Taxonomy Extension Presentation | ||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* | |
| * | Filed herewith. |
| ** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RUMBLEON, INC. | |||
| Date: August 4, 2021 | By: | /s/ Marshall Chesrown | |
| Marshall Chesrown | |||
Chief Executive Officer (Principal Executive Officer) | |||
| Date: | By: | /s/ | Beverley Rath |
| Beverley Rath | |||
Interim Chief Financial Officer | |||
| (Principal Financial Officer and Principal Accounting Officer) |
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